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Mortgages / Guide to Mortgages
First time buyer? Moving house? We want to help you with the home buying process so we've put together a ten-step guide that'll explain to you the key stages of getting a mortgage to buy a property.
Before you begin house hunting, you'll find it invaluable to talk with a Mortgage Arranger at your local branch. It's better to do this before you find your ideal home, especially if you're a first time buyer and a little uncertain of the mortgage and home buying process. Read more.
Your Mortgage Arranger is there to ensure your application progresses swiftly and is a good source of free information. They are able to answer any questions or concerns you might have and will be pleased to go through the Budget Planner and Property Checklists – you may want to complete the Budget Planner before your meeting.
Your Mortgage Arranger will be pleased to provide you with quotes showing approximate repayments.
Contact your Mortgage Arranger.
Your Mortgage Arranger will be able to calculate the actual amount your mortgage will cost, and help you to plan your whole budget accordingly. Read more.
When buying a property, your mortgage is not the only cost you will have to consider. There will also be valuation or survey fees, legal expenses, stamp duty (Conge and document duty in Guernsey, recordal fees in the Isle of Man), insurance cover and removal expenses. If you are selling an existing property there will be estate agent fees as well.
At Lloyds Bank we will help you to work out all the various costs before arriving at a final figure. Our Budget Planner has been designed to help you to determine the costs involved. As a general rule, your monthly mortgage (and other loan) repayments should not be more than half your monthly income after tax.
Your Mortgage Arranger will be happy to help you to choose the most suitable mortgage for your needs. The cheapest mortgage is not always the best, and spending time to find the one that is most suitable could save you thousands of pounds in the long run. A Lloyds Bank mortgage can be repaid over a period of up to 35 years, although 25 years is the normal term. Your choice of mortgage will depend on your individual circumstances, such as your age, marital status, salary and other factors.
There are four types of mortgage – repayment, endowment, pension and interest-only – and a number of different mortgage loans such as Fixed Rate and Tracker mortgages. Read more.
With this type you repay part of the capital each month along with interest on the outstanding balance. Your payments will gradually reduce the mortgage over an agreed number of years. It will be repaid in full by the end of the agreed term so long as you make each payment when it is due.
This type is only available if you have existing suitable life policies. It involves making two separate repayments each month: one to the bank as interest on the mortgage – the other a premium on an endowment policy with a life assurance company. This policy should produce for you a cash lump sum at the end of an agreed term that may repay all or part of the mortgage.
This type of mortgage may be appropriate if you have an existing suitable pension fund. If you are eligible for a personal pension plan, then you can make payments into a pension fund to provide you with a tax-free cash lump sum that should be sufficient to repay the outstanding mortgage at the end of the agreed term. During the period of your mortgage you will make monthly interest payments to the bank and payments to the pension provider.
This offers the lowest monthly payments since you are not paying back any capital sum borrowed or funding an insurance or pension scheme. The capital remains outstanding until an agreed date in the future when it is repaid. This method is only suitable for people with substantial investments or other resources they can use to repay the mortgage.
Fixed Rate mortgage offers a constant rate of interest for a given period, typically between two and five years. So, with this type of mortgage, you will know how much your monthly payments will be.
The rate you pay will be set at a certain fixed percentage above the Bank of England base rate. Whenever the base rate changes, the interest rate you pay will follow within one month.
Don't worry. At Lloyds Bank we can combine the various types of mortgage to tailor-make a package for you. Please speak with your Mortgage Arranger who will be happy to discuss your options.
So what type of property are you looking for? Is it a house or a flat, freehold or leasehold, character charm or new build? It's time to start viewing, so here are some helpful tips to bear in mind. Read more.
Normally a house is sold freehold, which means that you own it entirely, for as long as you like. Flats, however, are normally purchased leasehold, where you have ownership of the property for a period of years. Once the lease has come to an end the property reverts back to the freeholder, so it's important to have a lease of sufficient length if you wish to sell the flat later. (Jersey does not have leasehold but instead has ‘flying freehold').
It is a good idea to contact several estate agents and ask to be put on their mailing lists. As a home buyer you do not have to pay estate agents' fees, but you should remember that agents act for the seller. Once you've explained to them what you are looking for, they will be able to provide you with details of any suitable properties and make appointments for you to see them.
You may be able to approach the builder directly so that you can benefit from any discounts or free fittings, for example kitchen appliances or carpets. Builders normally advertise their properties through local newspapers and sometimes through local estate agents.
It's a good idea to visit the property at different times of the day to find out, for example, if the street is noisy at night or whether it is particularly busy at lunchtimes. Don't visit only when the sun is shining; if you visit during a storm, you may be able to spot a leaky roof or poorly fitted windows. You may find our Property Inspection Checklist helpful.
Once you've found your ideal home, you're ready to make a formal offer. The amount you offer should be based on how much you can afford, how much the property means to you and how you would feel if someone ‘outbid' you with a higher price. Read more.
It's a good idea to check how the asking price compares with neighbouring properties, how long the property has been on the market and whether the seller has found somewhere else to buy. Many sellers fix their asking price above what they would be willing to accept because they expect potential buyers to offer less than the ‘advertised' price.
You can always increase your offer and carry out any price negotiations through the estate agent or builder, but if you are buying privately, you may agree the price directly with the seller or the seller's advocate/solicitor.
You should tell your advocate/solicitor when you've agreed a price. Remember that making and accepting verbal offers is not legally binding and therefore neither you nor the seller should be committed to the purchase at this stage. Always take legal advice before signing any documents or paying any deposit.
Once your offer has been accepted, you'll need to finalise the arrangements for the mortgage with your Mortgage Arranger. Read more.
When meeting your Mortgage Arranger to complete the application, or if you are handing in the completed application, you'll need to provide these original documents:
We'll also need to see proof of identity and residence, such as the original or a certified copy of your full passport, or your full driving licence, or any other official document containing your photograph and signature.
When you apply for your mortgage we need to make sure that the property you're buying is worth more than the amount you wish to borrow. We do this by having a ‘Lender's Valuation' carried out but this is just one of several types of valuation. Read more.
This is the cheapest option and the minimum we require for a Lloyds Bank mortgage. It's simply a valuation that helps us to decide how much we can lend. It will not necessarily highlight any structural problems and you should not rely on the valuation to decide whether to buy the property.
This is a ‘mid-priced' option and is appropriate for most people because it provides enough information to highlight potential problems and could influence your decision to purchase the property or help you negotiate a lower price.
This is the most expensive option but is well worth considering if you are buying an old property or one that you think will need extensive repairs or alterations. This type of survey will highlight any structural work that needs to be done and may prove invaluable in helping you to avoid costly mistakes.
Once your application has been accepted, we will normally make a mortgage offer based on the purchase price. However, if the valuation is lower than the purchase price, we will only base our mortgage offer on the valuation figure. You will receive your offer in the form of a letter from us, which sets out the details of the mortgage such as the interest rate, payment method, mortgage term and repayment amounts.
Before the purchase of your new home goes ahead, an advocate/solicitor will need to complete all the legal work for you – a process known as conveyancing. Here's a quick overview of what it involves although there are differences in Guernsey, Jersey and the Isle of Man. Read more.
Your advocate should carry out a number of searches and enquiries on your behalf, such as:
You'll need to consider the different types of insurance you may need early on to make sure that you and your property are protected as soon as you become responsible for it. Read more.
You can arrange life insurance that will pay off your outstanding mortgage in the event of your death so that your family will not be left with this financial burden. Some policies also offer the option of serious illness and disability cover.
This will cover the bricks and mortar of the property and it's vital that you have your policy ready to take effect as soon as you become legally responsible for the property.
This will cover the contents of your home against a wide range of threats including fire, flood, malicious damage and theft.
Your moving in day is what you have been working towards. It is an exciting time but there are plenty of things you'll need to do for it to go smoothly. Read more.
First you need to decide on the date that you can move into your new home. This is particularly important if you have a place to sell and need to co-ordinate a date with the people moving into your existing home. If you're currently renting, you'll need to give your landlord a leaving date.
Obtain quotations from a number of firms and make a provisional booking. Some removers will also pack for you. If you're looking to hire a van and carry out the move yourself, book it early and make sure your belongings are insured during transit.
Before you move you'll need to contact all utility providers – electricity, gas, telephone and water – to arrange final bills and reconnection at your new home.
Start letting everyone know that you are moving.
Approximately two weeks before you move start packing everything except necessities and last-minute items. Some removers will provide boxes, but remember that some removal firms will not take financial responsibility for breakages unless they have packed everything themselves.
With a Lloyds Bank mortgage you can choose a payment date that suits you. We will then automatically deduct your mortgage payments from your Lloyds Bank account on the same day every month. Your first payment will normally be deducted up to one month after your completion date. So if you complete on 20th May and choose the 5th of each month as your payment date, your first payment will be deducted from your current account on 5th June.
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