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Mortgages / 10 step guide
Your mortgage arranger will be with you throughout the process.
We’ve created this easy-to-follow 10 step guide to the home buying process. This information is particularly valuable if you’re a first time buyer.
Your mortgage arranger will provide you with information about our products to help you make an informed choice. We do not provide mortgage advice, for that you may need your own mortgage adviser.
Before you begin house-hunting, you’ll find it invaluable to talk with a mortgage arranger at one of our branches.
Your mortgage arranger is experienced in the property-buying process and has good knowledge of the other financial services that you may need – insurance for example.
They will ensure your application progresses swiftly and your mortgage arranger is a good source of useful information. Additionally, you’ll be dealing with a fully qualified legal professional – either a solicitor or advocate (except in Alderney where you deal with an estate agent).
Your mortgage arranger will provide you with quotes to give you an idea of repayment levels, so you can budget accordingly.
A mortgage can be repaid over a period of up to 35 years depending on circumstances.
Making as big as a deposit you can comfortably afford means you borrow less and will pay less interest leading to lower monthly repayments. The more you can save for a deposit, the less you will have to pay back in the long run.
This is why it is a good thing to start saving early.
Two things affect the amount that we will lend you:
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 (document duty in Guernsey and Alderney, 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 too.
At Lloyds Bank International we will help you to work out all the various costs before arriving at a final figure.
Your mortgage arranger will be able to calculate the actual amount your mortgage will cost, and help you to plan your budget accordingly. Together you will ensure that you can comfortably meet your repayments.
As a general rule, your monthly mortgage (and other loan(s), school fees and childcare costs) repayments should not be more than half your monthly income after tax.
The more you can save for a deposit, the less you will have to pay back in the long run. This is why it is a good thing to start saving early.
This is the most popular type of mortgage. With this type you repay part of the capital each month along with interest on the outstanding balance. So 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.
There are two types of repayment mortgages:
Unlike most mortgages, where the interest rate can change, increasing or decreasing your monthly repayment, a fixed rate mortgage stays at a constant rate for a given period, typically two, three or five years, no matter what happens to general interest rates. Therefore, with this type of mortgage, you will know how much your monthly payments will be.
This could be particularly suitable for a first time buyer, who would appreciate the ability to budget expenditure. You can choose (from the current range of options) how long you would like the mortgage rate to remain fixed for, with the confidence that whatever happens to interest rates in the meantime, the rate you pay stays the same.
A redemption/partial repayment charge will be made if, during the period of the fixed rate, you either redeem the mortgage in full or make a part repayment.
With our range of tracker repayment mortgages, the rate you pay will be set at a fixed percentage above the Bank of England base rate depending on the amount borrowed.
Whenever the base rate changes, the interest rate you pay will follow within one month. The amount of your monthly payment is reviewed regularly.
Unless you have a fixed rate mortgage, the amount you pay will depend on the interest rate charged. Your monthly payments may vary from time to time as mortgage interest rates go up or down.
You could repay some of the capital borrowed earlier than originally planned – either by increasing your monthly repayments, perhaps when you receive a pay rise or promotion, or in one or more lump sums, perhaps after receiving an inheritance or following the maturity of an investment.
This will enable you to reduce your monthly interest payments. However, if you make an early repayment on some types of mortgage there will be an early repayment charge.
Still not sure about the most suitable mortgage for you?
At Lloyds Bank International we are able to combine the various types of mortgage we offer. You can discuss the alternative options with your mortgage arranger (although we do not offer advice).
Decide what type of property you are looking for – a house or a flat, freehold, leasehold or share transfer.
Normally a house is sold freehold, which means that you own it entirely, for as long as you like.
Other than in Guernsey, where flats are purchased freehold (or Jersey where they are normally purchased as a share transfer), flats are normally purchased leasehold where you have ownership of the property for a period of years – sometimes as long as 999 years but normally much shorter.
Once the lease has come to an end the property reverts back to the freeholder. Therefore it is important to have a lease of sufficient length if you wish to sell the flat later. This will also affect our lending decision.
During the period of the lease the freeholder will maintain the structure of the overall building, which includes the flat and the surrounding land. You will be charged a 'ground rent' or 'service charge' each year for your share of these costs.
When you are considering buying a home it is 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.
Making notes on the particulars, if you are buying through an estate agent, can be very useful and help you to compare properties. It is also important to check for things like damp. Issues like this can cause delays or extra costs later in the process.
Once you've decided which type of property you would like to buy, you can begin the search.
There are three main sources of information available for purchases of existing homes:
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 have 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 will normally negotiate the price with the estate agent rather than the seller. It is a good idea to contact several estate agents and ask to be put on their mailing lists.
Occasionally, people wish to sell their homes themselves rather than employ an estate agent. You will normally find they advertise in their local newspapers and if you reply you will find yourself dealing directly with the seller. Most advertisements, however, tend to be placed by the owner's estate agents.
If you are interested in buying a new home, 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, that may be on offer. Builders normally advertise their properties through local newspapers and sometimes through local estate agents.
One advantage of buying a new home is that you avoid 'chain' problems, which often occur when the seller decides not to sell because his or her purchase has fallen through. Buying a new home also gives you a 'clean slate' to work with.
Once you've found your ideal home, you can 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 as well as the market value of the property.
Before you decide what to offer, it is 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. Don't be afraid to negotiate. 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.
Once you have agreed a price, you should tell your advocate/ solicitor. Remember that making and accepting verbal offers is not legally binding and therefore neither you nor the seller would 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 will need to finalise the arrangements for the mortgage with your mortgage arranger. Mortgage application forms are available from all our branches, but we would advise you to complete them with the help of your mortgage arranger.
To ensure your application progresses as smoothly as possible, it is important to bring all required paperwork to your appointment with your arranger.
When meeting your mortgage arranger to complete the application, or if you are handing in the completed application, please ensure the following original documents are also provided, if applicable:
The original document can be given to your mortgage arranger who will be happy to photocopy and certify it for you.
When you apply for your mortgage it is important to check the value of the property that you intend to buy.
As a lender we also need to make sure that it is worth more than the amount you wish to borrow. Therefore, before we can complete your mortgage we will need to have a 'lender's valuation' carried out by a valuer acting for the bank, selected from an approved panel of valuers. You can find a more detailed explanation of this and other types of valuation below.
Please bear in mind that once the survey is commissioned you must pay for it whether or not you proceed with the purchase and whether or not the property is suitable as security.
This is the cheapest option and the minimum we require for a Lloyds Bank International mortgage.
This is 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 or to determine how much you should pay for it. We strongly recommend that you have a more comprehensive survey done for your own peace of mind.
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. It is less detailed than the full structural survey, but includes an inspection on the general state of repair and condition of the property and, provided it has been carried out by a Lloyds Bank International approved surveyor, will also be acceptable as a valuation for mortgage purposes.
This is the most expensive of the three options 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 bring to your attention any structural work that needs to be done and may prove invaluable in helping you to avoid costly mistakes or to negotiate a lower price if any problems are revealed. A full structural survey can also cover the requirements for a mortgage valuation providing you use a Lloyds Bank International approved surveyor and let us know about the survey in advance.
Your mortgage arranger should be able to give you an indication of the costs for each type of survey.
When purchasing a flat in a block building, the valuer may have issues accessing the whole property. This should be considered and checked when deciding on which type of valuation to get.
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.
A full structural survey is worth considering if you're buying an older property, or one that you intend to make repairs or alterations to.
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.
Before you make a decision, do ask for an estimate as to what the legal fees will be.
Your advocate should carry out a number of searches and enquiries on your behalf, such as:
Once your offer has been accepted the following should happen:
These steps can take anything from a few days to several weeks to complete depending on whether you are buying a new or existing property and how quickly the seller wants to move.
This normally takes place two to four weeks after the signing of conditions of sale.
At this stage your advocate will:
You should now be able to collect your keys and move in!
The legal process for your purchase is similar to Guernsey but is governed by the Alderney Land Registry.
The conditions of sale are very close in form to those used in Guernsey but there is no obligation for you to attend court as completion is by registration of a land transfer document which can be submitted by post. There is a requirement by the Alderney Land Registry for verification of your identity which must be satisfied before the registration can take place.
These steps usually take 2–6 weeks to complete, depending on how quickly both parties wish to proceed, and on whether any problems arise.
Settlement is made to the vendor on the Tuesday following the Royal Court registration via your advocate.
The principle of freehold is that the land on which the property sits is owned by you, and by extension everything below and above that plot of land also.
Until 1991, only houses could be owned in this way, and flats had to be purchased differently. Confirmation of ownership is a contract of purchase, passed before the Royal Court. There is no registered land in Jersey although there is register of contracts passed before the Royal Court.
Before 1991 ownership of a flat was problematic. A limited company was formed to own the whole building. The articles of the company are phrased to link the exclusive occupation of each flat to a block of shares. Each block of shares then gives the owner the exclusive rights of occupation, use and enjoyment to a specific flat in the block.
The company's memorandum and articles of association states the duties and obligations of both the company and the shareholder, and a copy of them must be obtained by the purchaser before entering into a share vending agreement to buy a block of shares.
The Population Office rarely has control over share purchases, so effectively anyone can buy on a share transfer basis. Occupation of the flat is controlled and only usually those who hold the correct status may live in it.
The 1991 'flying freehold' law introduced the possibility of buying a flat in a way similar to a normal freehold purchase. The owner of a flying freehold property will automatically become a member of an association of co-owners. The association's rules will state the rights and obligations of each member, including responsibilities in regard to common areas such as stairways and gardens.
There is no stamp duty in the Isle of Man but recordal fees are payable to the Manx Government.
Advocates are permitted to act for both parties in property transactions provided there is no conflict of interest and no objection is raised by either party.
Home insurance is compulsory when taking a mortgage and must be in place when you legally transfer. This can be several days or weeks before you actually move in.
Ensuring your property has adequate insurance cover is not the only thing that you should consider. You should also ensure that you have sufficient cover in the event of your death, illness or disability. We do not offer life insurance, for further information please speak to an independent adviser.
If you have a family or plan to start one, you need to ensure that, should you die, they will not be left with the mortgage debt. Insurance is available to cover almost any eventuality, and making certain that you are well covered is nearly as important as making sure you have the right mortgage.
This will cover the bricks and mortar of the property and it is vital that you have your policy ready to take effect as soon as you become legally responsible for the property.
It is particularly important that you consider this when taking out a mortgage. 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, which will pay off your mortgage if you are diagnosed as having an illness or disability covered by the policy.
This will cover the contents of your home against a wide range of threats including fire, flood, malicious damage and theft.
You will normally want to have cover from the time when you move your belongings into the property. Contents insurance is something we strongly recommend you get, although it is not a legal requirement.
First you need to decide on the date that you can move into your new home and agree with all parties. 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. Matching your dates will prevent you from having to pay for two properties. Should you be currently renting, you will need to give your landlord a leaving date.
If you are hiring a removal firm to move your belongings, obtain quotations from a number of firms and make a provisional booking. Some removers will also pack for you, which may be advisable. See the section on packing below. If you are looking to hire a van and carry out the move yourself, you should also book it early. Make sure your belongings are insured during transit.
Before you move you will need to contact all services – electricity, gas, telephone and water – to arrange final bills and reconnection at your new home.
Start letting everyone know that you are moving.
You may wish to measure up for new carpets and curtains; however, it is wise not to commit yourself to ordering until after the completion date (or after conditions of sale have been signed in Guernsey and Alderney) in case the purchase falls through.
Approximately two weeks before you move, start packing everything except necessities and last-minute items. Some removers will provide you with boxes for this, but if your removal firm will not take financial responsibility for breakages unless it has packed everything itself, leave the packing to the removers. Remember to have all the essentials to hand for moving day itself.
Moving can be hard work, particularly if you decide to do all the moving yourself. Planning ahead will help everything to go smoothly.
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