'How let to buy mortgages work' by the specialist let to buy mortgage broker

To buy a home with a mortgage, you will need to save a deposit of at least 5%. The more you can save, the better your mortgage rate will be. There are a few exceptions to this however as follows:

• If you already own a home, you can use the equity from your property for the deposit
• If you are a council tenant and are looking to buy your current home under the Right to Buy scheme, most mortgage lenders will now accept your Right to Buy discount as a deposit.

With property prices increasing, first time buyers are struggling to save enough money to buy a home. The government has therefore introduced 'Help to Buy' to enable first time buyers to get on the property ladder.

Our professional mortgage advisors are experts on all the various mortgage deals available and can help you decide which mortgage deal best fits your needs.

When buying a home, you will need to not only have enough money saved for your mortgage deposit, but also your mortgage fees, moving costs and legal expenses. We have compiled a handy list below of all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.

Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.

Cost: £99 - £250

Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.

Cost: £1,000 - £2,000

Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller's solicitor.

Cost: £25 - £50

Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.

Cost: £95 - £495. However, this may vary if you need to use a specialist lender

Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:

Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.

Cost: £250

Homebuyer's report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.

Cost: £400

Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.

Cost: £600

Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.

Cost: Approximately 1.5% of the amount you borrow

Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property's value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.

Cost: £250 - £300

Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.

Cost: £850 - £1,500 plus VAT

Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:

First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:

• £0 - £300,000: 0%
• £300,001 - £500,000: 5%

Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:

• £0 - £125,000: 0%
• £125,001 - £250,000: 2%
• £250,001 - £925,000: 5%
• £925,001 - £1.5 million: 10%
• £1.5 million+: 12%

Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:

• Less than £125,000: 3%
• £125,001 - £250,000: 5%
• £250,001 - £925,000: 8%
• £925,001 - £1.5 million: 13%
• £1.5 million+: 15%

For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £25,000 = £1,250

Total SDLT = £3,750

Information correct as of December 2017 - Source: www.gov.uk/stamp-duty-land-tax... costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.

Cost: £300 - £600

For the majority of mortgages, you borrow money from a lender to buy a property and pay interest on the loan until you have paid it back. The only exception are interest-only loans. Here are the different types of mortgages available:

• Repayment
• Interest-only
• Fixed rate
• Variable rate
• Tracker
• Discounted rate
• Capped rate
• Cashback
• Offset
• 95%
• Flexible
• First time buyers
• Buy to let

Repayment mortgages: Every month you make a payment which is calculated so that you pay off some of the capital you have borrowed, as well as the interest. By the end of your mortgage term, you would have repaid the entire loan.

**Interest-only mortgages: **Each month you pay only the interest on your mortgage and repay the capital at the end of your mortgage term. This option will not suit everyone, as you will need to guarantee that you can find the money when the time comes. If you don't, you risk having to sell your property to pay off the mortgage. Lenders can also insist that you provide evidence on how you intend to do this.

Fixed rate mortgages: Popular with first time buyers, as you know exactly how much you'll be paying each month for a particular length of time.

The disadvantages are that you may have to pay a higher rate if the interest rate falls, and a repayment charge if you either switch or pay off your mortgage before the end of the fixed term.

The lender will also automatically place you on a standard variable rate (SVR), which will probably have a higher interest rate, in which case you will need to apply for another fixed rate deal.

**Variable rate mortgages: **Also known as a Standard Variable Rate (SVR) and are every lender's basic mortgage. The interest rate fluctuates, but never above the Bank of England's base rate and is determined by your mortgage lender.

Tracker mortgages: Vary according to a nominated base rate, normally the Bank of England's, which you will pay a set interest rate above or below.

Discount rate mortgages: Some of the cheapest mortgages around but, as they are linked to the SVR, the rate will change according to the SVR and are only available for a fixed period of time.

Capped rate mortgages: A variable rate mortgage, but there is a limit on how much your interest rate can rise. However, as mortgage rates are generally low at present, many lenders are not offering them.

Cashback mortgages: Lenders typically give you a percentage of the loan back in cash. However, you need to look at the interest rate and any additional fees, as it is very likely that you will be able to find a better deal without cashback.

Offset mortgages: Combines your savings and mortgage together, by deducting the amount you have in your savings, meaning you only pay interest on the difference between the two. Using your savings to reduce your mortgage interest means you won't earn any interest on them, but you will also not pay tax, helping higher rate taxpayers.

95% mortgages: Generally for those with only a 5% deposit. However, as there is a risk that you may fall into negative equity if house prices go down, mortgage rates are usually high.

**Flexible mortgages: **Allow you to overpay when you can afford to. Other mortgages give you this option too, but you can also pay less at particular times or miss a few payments altogether if you have chosen to overpay. This does however come at a cost, as the mortgage rate will generally be higher than other mortgage deals.

First time buyers mortgages: All of the aforementioned mortgages are available to first time buyers, although some are more favourable than others. The government also offers a number of incentives for first time buyers through its help to buy scheme.

Buy to let mortgages: Enables you to purchase additional property for renting purposes only. The amount you can borrow is partially calculated on the rent payments you expect to receive.

Getting a mortgage application approved is dependant on you, your mortgage advisor, solicitor and lender. At CLS, we handle the entire process for you through to completion, communicating with your solicitor and lender to remove the stress and hassle from you and ensure that your application is a success. Having all the relevant mortgage documentation to hand ready for your mortgage advisor, will also help speed up the process.

When buying a home your mortgage lender will likely insist that you have buildings insurance in place before you exchange contracts.

Whilst it is not compulsory to have any other level of cover in place to buy a property, there are insurance policies that can help you through a rough patch. For example, income protection can pay your mortgage repayments for a fixed period of time, should you unexpectedly find yourself out of work due to an injury or illness, whilst a life insurance policy could completely clear your outstanding mortgage debt, should the worst happen to you.

If you would like to know more about the various protection options that are available, we can help. Our expert mortgage and protection advisors can meet or chat at a time to suit you, and can ensure that you get the right level of cover for your personal circumstances at an affordable price.

If you need a mortgage to buy your new home, then your mortgage lender will ask that a valuation be conducted on the property, before they determine whether they will approve your mortgage offer or not.

There are three different types of home surveys available. The survey your lender will request to be made, is dependent on the type of property you are looking to buy. For peace of mind, you can however pay to have a full structural survey carried out on your property, before you commit to buying it.

• Home condition survey: Most basic and cheapest survey, often used for new-builds
• Homebuyer's report: More thorough, as it evaluates the inside and outside of the property
• Building survey: A complete survey that assesses the full structure of the property, generally used for older or unusual properties.

Most people are able to remortgage their home to get a new mortgage deal. There are many reasons why remortgaging could be a good option for you including:

• Getting a better mortgage rate
• Having the option to make overpayments
• Enjoying a more flexible mortgage
• Freeing up cash for some long awaited home improvements
• Purchasing additional property
• Saving money on your monthly repayments
• Reducing your current term

If you would like to know which remortgage options are available to you, get in touch! Our expert remortgage advisors will provide you with a free mortgage review and compare thousands of deals to find the remortgage deal that best fits your needs.

The first thing you will need to consider before you remortgage is how much you can afford to pay. You can do this by collating your mortgage paperwork and recent bank statements together, to see what your current interest rate is and how much your monthly outgoings are.

You will also need to check if you will need to pay any additional costs such as; an arrangement fee to your new lender for setting up the mortgage, an exit fee and/or early repayment charges for leaving your current lender, and valuation and legal fees. Some fees can be added to your mortgage.

Remember, if you choose to do this, you will have to pay interest on them. Luckily, most remortgage deals have no or low set up costs. But, it's important to make sure you check first before committing to a new mortgage deal.

Part of our service in ensuring that you get the best remortgage deal, is to check whether a new mortgage deal would be the best option for you, based on the interest rate and any potential fees involved.

When you move home, you should be able to transfer your current mortgage to your new property. As you will probably need to borrow more, in order to purchase your new home, your mortgage lender will want to value the new property.

Moving home is however one of the best times to get a better mortgage deal. You will firstly need to check if there are any early repayment charges or exit fees for repaying your current mortgage deal early, which your current lender should be able to tell you.

If there are penalties for leaving your current lender, then you will need to find a new mortgage deal that is sufficiently cheaper to cover these costs. Our mortgage advisors are remortgage experts and can tell you whether a new mortgage deal would be best for you.

In order to buy a new home with a mortgage, you will need to sell your existing home first. However, if you are struggling to sell your home, you could consider renting your property temporarily, until you are able to sell it.

A let to buy mortgage would enable you to lease your current property and buy a new home. Let to buy mortgage lenders will need to see that your rental income will comfortably cover your mortgage repayments. But, if you choose to continue letting your existing property instead of selling it, you will need a buy to let mortgage.

If you think a let to buy mortgage will help you secure the property of your dreams, you will need to apply for both a let to buy and residential mortgage, and ensure that both applications complete at the same time, which we can arrange for you.

If you buy a second property that is not your main residence, you will have to pay Stamp Duty Land Tax (SDLT) on it. The amount you will pay is dependent on the purchase price of the property as detailed below:

Less than £125,000: 3%

£125,001 - £250,000: 5%

£250,001 - £925,000: 8%

£925,001 - £1.5 million: 13%

£1.5 million+: 15%

Information correct as of April 2017 - Source:www.gov.uk/stamp-duty-land-tax/residential-property-rates