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HM Forces
Personnel

          b y Fra n k J K e l l y o f




              Home Buying / Mortgage Guide
our complete home-buying service
Free background survey information on as many properties as you
see until you find the property – you’ll only pay for a survey once.

One of our Independent mortgage team assigned as your case-
manager – will research the whole of the UK mortgage market to
find the most suitable deal for you from 1,000’s of deals.

Our Forces solicitor arranged to handle the whole transaction for
you – completely familiar with LSAP and dealing with MOD etc.

Selling Agents dealt with by us on your behalf – we always aim to
negotiate the asking price of the property…downwards.

For full written details of our Complete Home-Buying Service
please contact us at:


Call 0845 612 3336
Email frank@nbhm.com
contents

Introduction                                            3
Credit Crunch – meaning for you                         4
Summary of whole mortgage process                       4
Getting onto the property ladder                        6
Why buy – why not rent?                                 6
The advantages/disadvantages of renting
The advantages/disadvantages of buying

Planning ahead                                          8
Decisions to be made
Stamp Duty

Getting a mortgage                                      9
Your repayment options
How much can I borrow?

What can I do if I have a poor credit-history?         11
What should I do?
BFPO addresses.
It’s not my fault!
What if I have debts?

Choosing an adviser                                    12
Dealing with an independent mortgage adviser
What level of service you should expect/demand!

It pays to have all the facts – before you go ahead!   13
Budgeting for a new mortgage

The Agreement-in-Principle (AIP)                       15
Credit-reference agencies
Credit-scoring
Electoral Roll

Buying-to-Let (BTL)                                    16
Difference between residential and BTL
The pros and cons of BTL’s
BTL taxation
Permission-to-Let
contents

Shared-Ownership                          17
How does it work?
Who offers these schemes?

Your Solicitor                            18
Surveys                                   19
Types
What if the property has problems?
Home Information Packs (HIP’s)

Mortgage-related insurances               21
Breakdown of the various costs involved   22
in the mortgage process
Solicitors fees
Scale of survey fees
Advisers fees
Lenders fees

Government First-Time Buyer Initiatives   23
and Key-Worker Schemes
England
Scotland
Wales

Avoiding the Pitfalls                     24
”Dreaded” Higher Lending Charge
Power of Attorney – Planning Ahead
LSAP – Allow plenty of time

Your Mortgage                             25
Summary                                   25
Ongoing help and advice                   26
Workshops and Seminars                    26
Glossary                                  26
introduction
Welcome to this Home-Buying/Mortgage Guide. Specially compiled for members of HM Forces, the Guide
contains much from the national-selling First Time Buyers Mortgage Kit (see it on www.waterstones.co.uk)
– whilst covering many more areas that are more relevant to the needs of Forces personnel – LSAP, past
BFPO addresses, Power of Attorney etc. The Guide also covers the many currently available Government
backed First-Time Buyers Initiatives and also their Key-Worker Schemes – these are designed to help
people who otherwise might have struggled to get on the property-ladder but who may now be able to find
help to do so. By using the Guide you will not be entering the ‘mortgage-maze’ blind. My advice, to get the
best from the Guide, is to read through the Guide before you start the mortgage process and then refer to
the relevant sections in the Guide as you reach them in the actual mortgage process.

What makes HM Forces personnel different from civilians – when it comes to home-buying? The very nature
of your job means that the majority of Service personnel move around regularly, many times to foreign
postings, with BFPO addresses, this makes credit-checking them, for mortgage purposes, difficult for a
lender. Many personnel are away whilst the mortgage process is under way, highlighting the need for Power
of Attorney. On the plus side, most personnel are eligible to use their LSAP towards house-purchase, giving
them, at least, a helping hand that many civilians do not get. Because of the nature of your employment,
many personnel are not on the Electoral Roll, hindering a lenders credit-scoring process. All of these points...
and more...are addressed in this Guide.

About Mortgages4Forces™
Mortgages4Forces™ (M4F) have provided an independent and complete Home-Buying Service to HM
Forces personnel for 14 years. Frank Kelly, of M4F, has written articles for many Forces publications –
Housing Matters, Brize Norton Gateway, Aldershot Garrison Herald, amongst others, and for many individual
battalion newsletters. All our advisers offer completly Independent advice on Mortgages and all areas of
financial planning. Apart from providing completely independent advice we have also negotiated discounts
and extra benefits on various stages of the mortgage process – up to 20% discount on all surveys
throughout Britain.

Buying a home, whether for the first time or not, is a massive financial commitment and it pays to do your
‘homework’ and to get things right – from the outset; this Guide aims to help you do just that. We have
tried to make the Guide as easy to use as possible; believing that there is far too much jargon used in the
mortgage-world, we’re sticking to plain English! If the advice in the Guide is followed, it should result in you
getting the best, and most suitable, mortgage possible – whilst keeping your costs to a minimum.

The Guide aims to take you step-by-step through the whole process of buying your home (whether ‘going-
it-alone’ or using an adviser) and, by highlighting as many possible ‘pitfalls’ as possible, to allow you save
money during the whole process. The Guide links to a website – www.mortgages4forces.co.uk which
provides a number of calculators which will enable to you to confirm the affordability of your plans and will
give you a realistic idea of what you may be able to borrow, depending on your circumstances. We know that
practically anybody considering a mortgage wants to know the costs involved so we include comprehensive
tables of fees from all those involved (see indexes at back of Guide).

For the purposes of this Guide I am assuming that you will be using an independent adviser – but most
of the information will be relevant even if you are ‘going it alone’. The Guide will start with a step-by-step
summary of the whole mortgage process – each step of the process (and much, much more) is then
explained in more detail. If any aspect of this Guide is not clear to you – or you need further explanation –
please contact us on 0845 612 3336 ,Email frank@nghm.com or via the Feedback section on the website.

There is a ‘Hotline’ number on the site (and at the end of the Guide), allowing you to contact us with any
query you may have on the Mortgage/Home-Buying process – our team will be happy to help. There is also



                                        Home Buying / Mortgage Guide                                               3
a ‘Feedback’ section on the site, allowing you to leave any queries you want answered and to hear from
you on any areas that you would like to see covered in the Newsletter section of the site or in any of the
many articles that we produce for Forces publications...or you can leave any comments on any Home-Buying
experiences – good or bad – that you may have had and which you think may help other people who are
about to enter the property/mortgage ‘maze’. Don’t forget to register on our website for the free monthly
Newsletter – Forces-Mortgage.

We hope you find the Guide useful and we’d appreciate your views on it (Call 0845 612 3336 or leave a
message in Feedback section on the website). Good luck with your Home-Buying.

One last thing – Throughout the Guide I have referred to advisers as ‘him’ – this is purely for simplicity and not
meant to be sexist in any way!
                                                   Frank Kelly
                                               Mortgages4Forces™



credit crunch (CC) – meaning for you
The CC has changed, dramatically, the whole Home-Buying/Mortgage market.
The main changes have been:

No 100%-plus mortgages. No 100% mortgages. Bigger deposits required to get ‘reasonable’ deals…
whereas, even a few months ago, there were lenders who would lend 95% and not charge a Higher Lending
Charge (see P25) – those days have gone. 10% deposit is normally required…but a bigger deposit will get
you a better rate. Mortgages are, generally, taking much longer to go through. Even the tiniest credit ‘blip’
(maybe a missed mobile phone payment) will deter some lenders. The amount lenders are willing to lend,
based on income, has been reduced in most cases. The lenders are charging higher Arrangement Fees for
their products.

What you need to do
Plan well ahead – allow plenty of time to get your mortgage in place. Get independent advice on how much
you are likely to be able to borrow. Get an Agreement-in-Principle (see P15) first. Make sure you can pull
together at least 10% deposit – if using your LSAP, make sure you apply for it in plenty of time. If you have
large debts, consider clearing as much of these as possible before applying for a mortgage. Get hold of your
Experian Report (see P15) so your independent adviser will know exactly who will and who won’t lend to
you. Allow plenty of time (aim at a longer entry date to the property) for the mortgage to go through.



summary of whole mortgage process
I am going to start this Home-Buying/Mortgage Guide by providing a summary of the whole mortgage
process:

•	   You have made your decision to buy.
•	   Assuming you are using an adviser, you have ensured that he is independent and registered with the Financial
     Services Authority (FSA) – you can do this by going to www.fsa.gov.uk – then click on FSA Register at top of
     page – then on the page this brings up click on FSA Register and enter the name of the firm or his FSA Number
     – which he should supply you with.
•	   Your adviser has given you his Initial Disclosure Document (IDD – see Glossary) and gone through a Financial
     Questionnaire (Fact-find) with you to confirm, amongst other things, affordability.



                                           Home Buying / Mortgage Guide                                              4
     •	   Your adviser has taken all relevant information and gone through the various types of mortgages that may suit
          your needs.
     •	   Your adviser recommends a particular mortgage product that he feels best meets your needs. (Important - he
          should always make sure that there is no tie-in to the lender after the deal period – 2/3/5 years etc ends – to leave
          you free adviseraround’ (your adviserto produce a Key Features Information (KFI) you aware of
            Your to ‘shop should be able will do this for you) – for a better deal. He should also make document
            for the particular deal on (ERP) and also, if it is your intention to you, the mortgage with all the
          any Early Repayment Penalties which he obtained the AIP for reduce fully explainingover-payments/
            relevant features gratuity particular mortgage deal and all costs.
          lump sum – maybe yourof that etc, during the ‘deal’ period, ensure that there are no penalties for doing so).
     •	   With your permission, your adviser has contacted a suitable lender for an Agreement-in-Principle (AIP) for
           You this stage you simply want various how much you may be able to borrow (or to ensure that, having
          you. Athave been looking at to find out properties and have seen one and more than one)
           that you are interested in – what emerge and contact your adviser and give him the
          run a credit-check, no past credit problems next? Youalso that you pass that particular lender’s credit score.
           address(es) of credit scoring process is then contacts a surveyor in
          (Remember that the the property(s). He likely to vary from lender to lender.) the area in which you
     •	    are interested be asks the surveyor for an Information property’s value, what it is
          Your adviser shouldandable to produce a Key Featuresidea of the (KFI) document for the particular deal on
           likely to sell for, what the area’s market is currently like and that other relevant
          which he obtained the AIP for you, fully explaining all the relevant features of any particular mortgage deal and
           information, all free of charge. He then gets back to you with the information.
          all costs.
     •	   You have been looking at various properties and have seen one (or more than one) that you are interested in –
            You decide that you want to proceed with a particular property that then contacts a price
          what next? You contact your adviser and give him the address(es) of the property(s). He is within yoursurveyor
            range (from your are interested and asks an offer. for an idea of the property’s value, what
          in the area in which youAIP) and you makethe surveyor You can make an initial offer (init is likely to
            Scotland you must do is currently like and any other relevant information, all free of charge. He then gets
          sell for, what the area’s marketthis through your solicitor) under the asking price – it is always
            worth a with the only danger with this is that if someone else comes in with an offer of
          back to youtry! Theinformation.
     •	     the actual asking price, you with a particular property that is within your price range (from your AIP) and
          You decide that you want to proceed are likely to miss out (doesn’t happen often).
            Note: In England and Wales you get the offer accepted this through your solicitor) survey
          you make an offer. You can make an initial offer (in Scotland you must do before you instruct a under the
            whereas in is always worth a try! in only danger with this is that someone else comes in with
          asking price – it Scotland you putThe an offer after a surveyifhas been completed. an offer of
          the actual asking price, you are likely to miss out (doesn’t happen often).
            You can only (safely) make an offer on the property once you have, at in Scotland you in
          Note: In England and Wales you get the offer accepted before you instruct a survey whereasleast, an AIP put
            place. after then inform your adviser
          in an offerYou a survey has been completed. and he arranges a solicitor to act on your behalf
     •	    (he’ll only (safely) make done on the the outset). If have, at least, solicitor you prefer inform your
          You canprobably have an offerthis atproperty once you you have a an AIP in place. You then to use,
           you and he so, but solicitor to paying a mortgage adviser, he is this at to outset). If you have
          advisercan doarranges aif you areact on your behalf (he’ll probably have done likely the be providing a
           you with a complete home-buying if you are paying a will include him is likely to be providing you
          solicitor you prefer to use, you can do so, but package whichmortgage adviser, he arranging a solicitor
           that he generally works with on your behalf. In arranging a where there are ‘offers-over’,
          with a complete home-buying package which will include himScotland, solicitor that he generally works with
           your behalf. In will ‘note interest’ in the property on your behalf, but in England and
          on yoursolicitor Scotland, where there are ‘offers-over’, your solicitor will ‘note interest’ in the property on your
           Wales the offer and Wales comes directly from you.
          behalf, but in Englandgenerallythe offer generally comes directly from you.


                  Note: Ensure your solicitor has given you your fees (as accurate an estimation
as                possible, at least) in writing – at the outset.

     •	   After your offer on the property is accepted, you then decide that you want to go ahead with a survey on the
            After your offer on the property is accepted, you then decide that you want to go
          property. Your adviser, at this point, will once more research the whole UK mortgage market to ensure that the AIP
            ahead with a survey on the property. Your adviser, at this point, will once more
          is still the most suitable deal for your needs (if it was obtained some time ago, other lenders may have produced
            research the whole UK mortgage
          better and more suitable mortgage deals). market to ensure that the AIP is still the most
           suitable deal for your needs (if it was obtained some time ago, other lenders may
     •	   Your adviser has confirmed that that the AIP is still best for you (or found a better deal). The adviser will then send
           have produced better and more suitable mortgage deals).
          you (or, if face to face, complete with you) a full mortgage application form for you to complete and return to him
          for the relevant lender.
           Your adviser has confirmed that that the AIP is still best for you (or found a better
     •	   Your adviser then contacts the lender to ensure that he can instruct a survey on your behalf (some lenders insist
           deal). The adviser will then send you (or, if face to face, complete with you) a full
          on instructing the survey themselves, especially if they are offering a free valuation as part of a particular deal). He
           mortgage application form for you to complete and return to him for the relevant
          will also check that the surveyor he is aiming to use is on the lenders’ panel. He must use a panel surveyor. The
           lender.
          panel confirms ‘yes’ or ‘no’ to instructing the valuation and also to the proposed firm of surveyors.
     •	   Your adviser then discusses the type of survey you want him to instruct (see section on surveys further on).
           Your adviser then contacts the lender to ensure that he can instruct a survey on your
     •	    behalf (some lenders insist on instructing the it, arranging for copies to especially if they
          You decide on the type of survey and your adviser instructs survey themselves, go to the relevant parties –
          you, your solicitor, your lender (it has to be typed up on the lenders headed paper) and your adviser (if applicable).
           are offering a free valuation as part of a particular deal). He will also check that the
     •	    surveyor he is for the survey report.
          You are now waitingaiming to use is on the lenders’ panel. He must use a panel surveyor.
           The panel confirms ‘yes’ or ‘no’ to instructing the valuation and also to the proposed
           firm of surveyors.
                                                  Home Buying / Mortgage Guide                                                       5
           Your adviser then discusses the type of survey you want him to instruct (see section
  getting onto the property ladder
 With the wide range of the property
getting onto mortgage products and areladder adviser available choosing
 even the most experienced of property-buyers
                                              different types of
                                                   likely to need help ; not only in
                                                                                     these days,

  the right mortgage, but throughout the whole mortgage process – non more so than first-time
With the wide range of mortgage products and different types of adviser available these days, even the
  buyers – referred to here-on-in as FTB’s.
most experienced of property-buyers are likely to need help ; not only in choosing the right mortgage,
  Even experienced home-movers can – non more so process daunting. – referred to here-on-in
but throughout the whole mortgage process find the wholethan first-time buyers With many lenders
ashaving merged in recent years, lending criteria that is constantly changing, many more types
   FTB’s.
  of mortgage deals appearing – all this has provided many advantages…as well as many
  pitfalls to be avoided. It can all find the whole process daunting. With many lenders having first
Even experienced home-movers can be pretty bewildering, especially for those taking their merged in
  steps into the market. The is constantly changing, many recommended to you, mortgage A
recent years, lending criteria thatcost of choosing, or having more types of mortgage deals appearing – all
  instead of mortgage B can cost you literally thousands of pounds It a MIG is charged – see
this has provided many advantages...as well as many pitfalls to be avoided. (ifcan all be pretty bewildering,
  Avoiding the Pitfalls at end of steps into the market. The cost of choosing, or having recommended
especially for those taking their first Guide). Although these thousands can, in most cases, be
   you, mortgage A instead and, in some cases, you literally thousands of pounds (if a when you are
toadded to the mortgage of mortgage B can costnot be particularly well highlighted MIG is charged
  taking the mortgage at – you are still paying these
– see Avoiding the Pitfallson end of Guide). Although for it. thousands can, in most cases, be added to the
mortgage and, in some cases, not be particularly well highlighted when you are taking the mortgage on – you
  Over recent years
are still paying for it. there has been much movement in the property market and this has led to
  significant increases in property prices. These increases have made it very difficult for many
  people to afford to has been much movement in the difficult for FTB’s. The section significant
Over recent years therebuy a home and it is especiallyproperty market and this has led to in this guide
  on Shared-Ownership, therefore, should be of interest to you; also the Government backed
increases in property prices. These increases have made it very difficult for many people to afford to buy a
  Key Worker and First-Time FTB’s. Initiatives that are available in certain parts of the
home and it is especially difficult forBuyer The section in this guide on Shared-Ownership, therefore, should
  country, if your income does not seem adequate to allow you to buy the type of property are
be of interest to you; also the Government backed Key Worker and First-Time Buyer Initiatives thatyou
  want in the area you want to live.
available–in certain parts of the country, if your income does not seem adequate to allow you to buy the type
of property you want – in the area you want to live.
 Most FTB’s have no (or very little) problem in raising a mortgage but, very often, it falls far
 short of have no (or very little) problem in properties they are aiming at.
Most FTB’swhat they ideally need for the raising a mortgage but, very often, it falls far short of what they
ideally need for the properties they are aiming at.
  Should you wait until you have saved a deposit (on top of using your LSAP), by which time
  property prices may have increased (substantially in many cases, answer all the recent
Should you wait until you have saved a deposit (on top of your LSAP)? – the despiteis almost certainly a
  warnings of doom and gloom) a borrow overall deposit of 10% - more possible. The are
resounding YES! You should aim for or minimumthe whole amount – 100%? ifMany lenderslarger the
  reviewing whether they are willing to lend up to 100%. Should you wait until you have cleared
deposit, these days, the better the mortgage deals likely to be available to you.
  off your current loans/credit-cards – or should you have them incorporated into the mortgage?
The above points, and many more, are addressed in this Guide.
  The above points, and many more, are addressed in this Guide.

       Thought: Remember that although you may be very keen to buy your home, especially
       If a first-time buyer, you really have to be confident that everything is affordable for you.
       You should ensure this before you commit to a mortgage.
                       Get
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why buy? why not rent?
 why buy? why not rent?
The next question is, inevitably, why buy? Why not rent or try for council accommodation? The second
option, council accommodation, is easily answered. It is practically impossible, with huge waiting lists, for
   The the question is, inevitably, why buy? Why accommodation anywhere accommodation?
any butnextmost desperate cases to be offered council not rent or try for council in the country. Even then
   The second temporary accommodation initially – even if you are homeless – until a more permanent
it is usually only option, council accommodation, is easily answered. It is practically impossible,place
   with found.
can be huge waiting lists, for any but the most desperate cases to be offered council
  accommodation anywhere in the country. Even then it is usually only temporary
  accommodation initially – even if you are homeless – until a more permanent place can be
  found



                                        Home Buying / Mortgage Guide                                           6
         Thought: It is important to remember that many councils/authorities will take into
         account your length of time in the Services to count towards points when applying for
         council housing (this can vary from local authority to local authority). Also remember
         that, in some cases, it will be the council from where you originated or have family ties
         that has responsibility for you. You may be from Gosport, for example and you may
         have been based in, for example, Fife for most of your career and may want to settle
         there – and may even have found employment there - but it may be that it will be
         Gosport council who have (if any) responsibility for providing you with accommodation.



 The advantages of renting:
The advantages of renting:
•	           Subject to your lease, you can from the property when you want.
     Subject to your lease, you can walk awaywalk away from the property when you want.
•	           Any mortgage rate changes (especially (especially increases) yournot affect your
     Any mortgage interest interest rate changes increases) will not affect will outgoings, although
             outgoings, although landlords are cover their mortgage outgoings.
     landlords are likely to increase future rents tolikely to increase future rents to cover their
•	            not incur outgoings.
     You willmortgagelegal or survey fees or any other fees normally associated with a mortgage
•	           You will not to save towards a deposit or to decide what to normally associated with a
     It may give you time incur legal or survey fees or any other fees do with your live (emigrate, maybe).
          mortgage
          It may give you renting:
The disadvantages of time to save towards a deposit or to decide what to do with your live
          (emigrate, maybe). for a property that will never be yours. You will, in many cases, be paying
•	 You will pay regular money out
     somebody else’s mortgage off for them.
•	 The disadvantages of renting:
    You are putting off getting onto the property-ladder (although you may have good reasons for doing so)
             You will be more expensive when you property that will never be yours. You will, in
     and it is likely to pay regular money out for ado decide to get onto the ladder.
•	           manymay have other plans for the property after your lease for them. a short-term lease it is
     The landlord cases, be paying somebody else’s mortgage off is up (with
              six to twelve months), meaning that you are forced to look around you may place to rent.
     usually You are putting off getting onto the property-ladder (althoughfor anotherhave good This
             reasons more than so) and it is likely to be morethe hassle and costyou do decide tosuitable
     may happen on for doing one occasion, leaving you with expensive when of trying to find a get
             onto moving your
     replacement,the ladder. family, processions, etc.
          The landlord may have other plans for the property after your lease is up (with a
          short-term lease it is usually six to twelve months), meaning that you are forced to
The advantages of buying:
          look around for another place to rent. This may happen on more than one occasion,
•	 You own a property that, in the medium to long-term, should appreciate in value as the amount borrowed
          leaving you with the hassle and cost of trying to find a suitable replacement, moving
   should be reducing annually as the equity (see Glossary) generally, increases if it is based on a Capital &
          your family, processions, etc.
   Interest (Repayment) mortgage (explained further on). 09You have your privacy and can have the property
   looking how you want it (within planning regulations, of course).
                              buying:
  The advantages of sell and move to another (bigger/better/different) property when you are ready –
•	 You can decide when to
          You own a property that, in the medium to long-term, should appreciate in value as
   you are in charge.
          the amount borrowed should be reducing annually as the equity (see Glossary)
•	 You are permanently based (as long as mortgage payments are met and as long as you choose to
          generally, increases if it is based on a Capital & Interest (Repayment) mortgage
   remain), so it offers you some stability.
           (explained further on).
           You have your privacy and can have the property looking how you want it (within
The disadvantages of buying:
           planning regulations, of course).
•	 You have to commit to what is probably the biggest financial transaction of your life, and the responsibility
           You can decide when to sell and move to another (bigger/better/different) property
   that goes with that. ready – you are in charge.
           when you are
           You are permanently based (as long as mortgage almost certainly have higher long as
•	 If you are moving from the mess/married-quarters etc, you will payments are met and as monthly
           you mortgage/insurance costs.
   outgoings –choose to remain), so it offers you some stability.
•	 You will have to meet a number of payments every month – month in and month out – whether you have
   budgeted for them or not. A
  The disadvantages ofmortgage is a serious financial commitment, with serious repercussions if
                                 buying:
   you default on it.
           You have to commit to what is probably the biggest financial transaction of your life,
             have to come up with that goes with that.
•	 You willand the responsibilitythe upfront fees involved in buying a property (e.g. survey fees, legal fees,
   possible deposit, Stamp Duty, etc). mess/married-quarters etc, you will almost certainly have
           If you are moving from the
           higher monthly outgoings – mortgage/insurance costs.
           You will have to meet a number of payments every month – month in and month out
           – whether you have budgeted for them or not. A mortgage is a serious financial
           commitment, with serious repercussions if you default on it.
           You will have to come up with the upfront fees involved in buying a property (e.g.
           survey fees, legal fees, possible deposit, Stamp Duty, etc).

                                       Home Buying / Mortgage Guide                                              7
           You’ve made the decision to buy, or are at least looking at the feasibility. Firstly, list
           all your current outgoings on a sheet of paper – your adviser will ask for this
           information, before going through everything more thoroughly with you, then think
           about what extra/different outgoings you are likely to have when you buy a property –
           Council Tax, Utility bills, Insurances Mortgage payments etc. Does it all look feasible
           at this early stage?
planning ahead
           Is a partner likely to be away during any part of the process – exercise, deployment?
           If so will Power of Attorney need to be set up?
           Pulling together the likely required documentation – payslips/bank
           made the decision to buy, or are at least looking at the feasibility. Firstly, list be sent off, to
•	 You’ve statements/passport and driving licence copies etc. If these have toall your current
           your adviser,of paper – your they will need for be certified by your CO or another everything
   outgoings on a sheet for example, adviser will ask to this information, before going through person
           of authority you, then think about what extra/different outgoings you are likely to have when you
   more thoroughly withwho knows you.
           Are you Council Tax, Utility bills, Insurances not, do you want on a ‘Permission-to-Let’
   buy a property – aiming to live in the property? If Mortgage paymentsitetc. Does it all look feasible at
           basis or
   this early stage? a ‘Buy-to-Let’ basis? Your adviser will be able to advise on your options.
•	 Is a partner you to using your LSAP? Do you process – to apply for it?
           Will likely be be away during any part of theknow howexercise, deployment?
•	 If so will Power of Attorney need to be set up?
    Pulling together be made:
•	 Decisions tothe likely required documentation – payslips/bank statements/passport and driving
             copies carefully have to everything your adviser, that you have finally made the
    licence Havingetc. If theseweighedbe sent off, toup, we hope for example, they will need to be certified
            decision to buy a property. Thiswho knows you.
    by your CO or another person of authority leads you to another batch of decisions:
              aiming to live in you afford each month?
•	 Are youHow much can the property? If not, do you want it on a ‘Permission-to-Let’ basis or a ‘Buy-to-
            The location of the property – is it on your options.
    Let’ basis? Your adviser will be able to advise handy for work/schools, etc.?
              be the properties that you know how or desirable
•	 Will youAre using your LSAP? Doseem suitable to apply for it?to you in your price range?
            Do you want to live in the property or to let it? If you are moving, do you want to retain
            your be made:
Decisions to current property on a Buy-to-Let basis?
            carefully weighed everything up, of hope that you is more relevant if you have buy a
•	 Having Do you need a particular sizewe property (thishave finally made the decision to children or
            possibly intend to work from home and need to convert a room into an office)?
   property. This leads you to another batch of decisions:
            Do can have a deposit to put
•	 How much you you afford each month? down – are you eligible for LSAP – or do you need to
            borrow the property – is it handy for avoid paying etc.? (see ‘Pitfalls’ at end of Guide)?
•	 The location of 100% - if 100%, can you work/schools, a MIG
             properties had – or suitable or desirable to you in your price range?
•	 Are the Have you that seem do you still have – any credit problems? If it is the latter, should
             want to live in these have been it? If you See ‘What can I want have a your credit
•	 Do you you wait until the property or to letcleared? are moving, do youdo if I to retain poorcurrent
            history?’ further basis?the Guide.
   property on a Buy-to-Let on in
             need a particular size of property does not have proof of have children or possibly intend to
•	 Do you If a partner is self-employed or(this is more relevant if you earnings, can you still go
            ahead? (In very rareconvert a room into an mean looking at the possibility of Self-
   work from home and need to instances this may office)?
•	 Do you Certification mortgages). If not, you need to save for a deposit – aim at 10% - minimum.
             have a deposit to put down?
            Do you have you still have – any credit problems? youis the latter,you have reduced or
•	 Have you had – or do outstanding debts? If so, should If it wait until should you wait until these
            cleared them or should you consider aiming to have them included the Guide.
   have been cleared? See ‘What can I do if I have a poor credit history?’ further on inin the mortgage
            (some lenders will or does not have
•	 If a partner is self-employed you to do this). proof of earnings, can you still go ahead? (In very rare
         instances this may mean looking at the possibility of Self- Certification mortgages).
•	             What can you afford each month? – your our online affordability
         Do you have outstanding debts? If so, the lender will take use monthly repayments (annualising them)
                                    calculator to You a not, as idea visit
         into account when deciding what to lend you. get willgood happened in the past, be allowed to clear
                                      www.mortgages4forces.co.uk
         existing debt with your new mortgage.

                          What can you afford to expenses, you your mortgage?
     When working out your likely home-buyingpay monthly for should always allow for Stamp
                         Use the ‘quick-guide’ calculator to get a rough idea – visit
     Duty Land Tax (SDLT) if you are purchasing a property worth £125,000 or more. SDLT can
                                       www.mortgages4forces.co.uk
     be quite substantial, depending on the purchase price of your new property. The SDLT bands
     are currently as follows:
When working out your likely home-buying expenses, you should always allow for Stamp Duty Land Tax
(SDLT) if you are purchasing a property worth £175,000 or more. SDLT can be quite substantial, depending
            £0 - £125,000: 0 per cent
on the purchase price of your new property. The SDLT bands are currently as follows:
                £125,001 - £250,000: 1 per cent
•	       £0 - £175,000: 0 per cent
•	       £175,001 - £250,000: 1 per cent
                £250,001 - £500,000: 3 per cent
•	       £250,001 - £500,000: 3 per cent
•	       Over £500,001: 4 per cent
                Over £500,001: 4 per cent

             Thought: There are some disadvantaged areas stamp duty exemptions (DASDE) and
             you can find out where these are (or whether the property you are buying is in one of
     8       them) by going to www.hmrc.gov.uk/so/disadvantaged.htm.
                                      Home Buying / Mortgage Guide



                                          Home Buying / Mortgage Guide                                          8
    A mortgage is a huge financial commitment and it is crucial that you get it right at the outset
    and that everything is comfortably affordable for you. It is all right living in the home of your
    dreams but not much fun if you are living on baked beans and are constantly worried about
    your finances – a balance has to be achieved.



    getting a mortgage
A mortgage is a huge financial commitment and it is crucial that you get it right at the outset and that
everything is comfortably affordable for you. It is all right living in the home of your dreams but not much fun if
you are living on baked beans and are constantly worried about your finances – a balance has to be achieved.
   A mortgage is another word for a property loan. It is a loan that allows you to borrow an
   amount of money in order to buy a property, which is secured against the property and which
getting a mortgage
   you pay back over an agreed time. You’ll normally borrow this money from a bank or building
   society or possibly a specialist lender if, for example, you have a poor credit history. Many of
   these specialists (adverse credit lenders) are actually subsidiaries of the major banks and
   building another word for a property loan. It is a loan that allows you to borrow an amount of money
A mortgage issocieties.
in order to buy a property, which is secured against the property and which you pay back over an agreed
     The term ‘secure’ simply money that if you or building society or and cannot keep lender if,
time. You’ll normally borrow this means from a bankdefault on paymentspossibly a specialist up with
     payment schedules, as agreed at the outset, the specialists the right to sell your are actually
for example, you have a poor credit history. Many of these lender has(adverse credit lenders) property in
     order to recover its money.
subsidiaries of the major banks and building societies.

    Mortgages are usually repaid over default on payments and cannot keep up with age, and
The term ‘secure’ simply means that if you 25 years but, depending on your situation, payment schedules,
    earnings, it can be arranged over a longer or your property For example, if you want to
as agreed at the outset, the lender has the right to sell shorter time. in order to recover its money. keep
    your monthly mortgage repayments down, you may (assuming your age allows it) opt to take
    the mortgage over a longer term, say 30 to 40 years. As situation, age, and the cost of the
Mortgages are usually repaid over 25 years but, depending on youryou are spreading earnings, it can be
    mortgage longer or shorter time. For payments will be lower. If your monthly mortgage repayments
arranged over aover a longer period, the example, if you want to keepyou want to clear the mortgage
    as quickly as possible, you may decide to take it over 10-15-20 years, for example. As the
down, you may (assuming your age allows it) opt to take the mortgage over a longer term, say 30 to 40 years.
    money has to be repaid more quickly, the monthly payments will be higher.
As you are spreading the cost of the mortgage over a longer period, the payments will be lower. If you want to
clear the mortgage as quickly as possible, you may decide to take it over 10-15-20 years, for example. As the
     The pros and cons of these two options – longer versus shorter term – are that you have to
money has to be repaid more quickly, the monthly payments will be higher.
    be able to afford the repayments over a shorter term and if you are alternatively opting for the
    longer term, you will be paying substantially (depending on how long the term is) more in
The pros and cons of these two options – longer versus shorter term – are that you have to be able to afford
    interest to the lender. Affordability is normally the main guiding factor in deciding on the term.
the repayments over a shorter term and if you are alternatively opting for the longer term, you will be paying
     The amount you borrow is called term is) more in interest to also have to pay back normally the
substantially (depending on how long the the ‘capital’, and you will the lender. Affordability is the interest
      guiding by the deciding
mainchargedfactor in lender. on the term.

The amount you borrow is called the ‘capital’, and you will also have to pay back the interest charged by
     You have two repayment options:
the lender.
    1. Repay the capital and interest together (known as a Repayment Mortgage); or
You have two repayment options:
    2. Repay only the interest together (known as a Repayment Mortgage); the
1. Repay the capital and interestand organise another investment to cover or capital at the end of
2. Repay only the interest and organise another investment to cover the capital at the end of the term
       the term (known as an Interest Only Mortgage).
   (known as an Interest Only Mortgage).
                                        of a monthly for your mortgage?
        What are the monthly costs to paynew mortgage likely to be? Use our
                   What can you afford
                                  online cost calculator
                  Use the ‘quick-guide’ calculator to get a rough idea – visit
                                www.mortgages4forces.co.uk
                         visit www.mortgages4forces.co.uk

           Note: The above examples refer to mortgages that are on a capital and interest
           (repayment) basis. For mortgages that are taken on an interest-only basis, the term is
           irrelevant – whether the term is one or 40 years!


How much can I borrow?
It all How much can I borrow?
       depends on your financial circumstances and your income. In these turbulent days, you can normally borrow
       It all depends on occasions) of the purchase price or the value of the You can borrow anything
up to 90% (95% on rare your financial circumstances and your income.property – whichever is lower. up
   to 100% of the purchase price or value of the property. Some lenders will lend even more
   than this amount, although you need to give a lot of consideration to these mortgages and be
Most lenders will restrict the amount you can borrow to 90% (95% in very rare circumstances). The higher the
   confident that you can really afford the repayments.
Loan-To-Value (LTV) – the higher the risk to the lender. That is why, on higher LTV’s, many lenders charge a
Mortgage Indemnity Guarantee Premium, known as a MIG (see ‘Guide to avoiding the pitfalls’ further on in
the Guide). Whatever the lender is willing to lend you – you must come up with the balance as deposit.
                                        Home Buying / Mortgage Guide                                           9
                                        Home Buying / Mortgage Guide                                               9
Some lenders will restrict the amount a FTB can borrow to 90-95% - the higher the loan-to-
value (LTV – see below) the higher the risk to the lender. That is why, on higher LTV’s, many
lenders charge a Mortgage Indemnity Guarantee Premium, known as a MIG (see ‘Guide to
avoiding the pitfalls’ further on in the Guide). If a lender is only willing to lend you 90-95% you
will have to come up with the difference as a deposit.

Income multipliers
Income multipliers
Lenders usually base their lending criteria on, amongst other things, a multiple of the
Lenders usually base their lending criteria buying alone, many lenders take the times your annual
applicant’s annual income. If you areon, amongst other things, a multiple of 3.5 applicant’s annual
gross salaryare buying alone, many lenders take 3.5 times your annual gross salary (before loan/credit-
income. If you (before tax and National Insurance have been deducted) minus any tax and
card/child maintenance/credit or hire purchase agreements.
National Insurance have been deducted) minus any loan/credit- card/child maintenance/credit or hire
purchase agreements.
If you are buying with a partner, many lenders will take three times the main income and plus
the secondary income or 2.5 times the borrower’s joint income, minus outgoings – as detailed
If you are buying with a partner, many lenders will take three times the main income and plus the secondary
above. or 2.5 times the borrower’s joint income, minus outgoings – as detailed above.
income

The multipliers used vary quite considerably. Some lenders multipliers multipliers score (see
Themultipliers used vary quite considerably. Some lenders base theirbase their on the credit on the credit
further on in further on in Guide) applicants. More and more these days’ lenders are basing what
score (see Guide) achieved by the achieved by the applicants. More and more these days’ they may
be prepared basing what they may be
lenders areto lend purely on affordability. prepared to lend purely on affordability.


           Example: Jill earns £20,000 per annum and Steve £22,000 per annum
           gross. Jill has £120 per month going out to repay a loan, with three years left,
           and pays around £60 per month for her credit cards. John has one small loan
           – paying £65 per month, with four months left to run. He has no credit-card
           balances but does pay £200 per month child maintenance to his ex-wife. The
           want to buy a property for £100,000 and have no deposit.
           Most lenders will take off 12 times Jill’s monthly loan and credit card
           repayments in order to work out her salary:
           12 x £180 = £2,160.
           £20,000 - £2,160 = Jill’s £17,840 usable salary for mortgage purposes.
           Steve’s loan repayments will almost certainly be ignored (as they have less
           than one year to run, although some lenders may use less than six months),
           but the lenders will take off his child maintenance payments:
           12 x £200 child maintenance = £2,400.
           £22,000 - £2,400 = Steve’s £19,600 usable salary for mortgage purposes.
           (£17,840 + £19,600 = £37,440) x 2.5 = £93,600.
           Even though this seems to leave the couple short of the £100,000 they
           require, the multipliers used in this example have been based on, probably,
           the lowest around and there will be many lenders who would very likely be
           happy to lend what they need.


All lenders these days are not just looking at set lending criteria. Many will be able to exercise
All lenders these stretching their normal lending multipliers slightly, in certain cases. The one
some flexibility,days are not just looking at set lending criteria. Many will be able to exercise some flexibility,
stretching their all lenders and advisers are heavily focused on one constant that They all and
constant that normal lending multipliers slightly, in certain cases. The is affordability. all lendershave a
advisers are heavily to assess their finances and commitments their client to confirm that any
duty to their clientfocused on is affordability. They all have a duty tothoroughlyto assess their finances
and commitments thoroughly to confirm that any recommendation is not just affordable for
recommendation is not just affordable for the client but comfortably affordable the client but too.
comfortably affordable too.

Loan to value (LTV)
Loanto value (LTV)
     amount you borrow in relation to the value of the is known as the loan to value (LTV). value
Theamount you borrow in relation to the value of the propertyproperty is known as the loan to You will
The
hear this term a number of term a number of times during your mortgage if you buy for For
(LTV). You will hear thistimes during your mortgage transaction. For example, transaction. £100,000 and
want to borrow £85,000 (assuming the property to borrow £85,000 (assuming the property values
example, if you buy for £100,000 and wantvalues at £100,000), your LTV will be 85%
at £100,000), your LTV will be 85%




                                         Home Buying / Mortgage Guide                                            10
10                                   Home Buying / Mortgage Guide
             Note: Always remember that all lenders generally lend based on the purchase
             price of the property or value of the property – whichever is lower!
           Note: Always remember that all lenders generally lend based on the purchase
           price of the property or value of the property – whichever is lower!
             Example: You are buying for £100,000 and have £5,000 (5%) deposit and want
             to borrow 95% (£95,000), but the property only values up at £95,000 (once the
           Example: You are buying for £100,000 and have £5,000 (5%) deposit and want
             survey is carried out). The lender will only lend you 95% of the £95,000 = £90,250.
           to borrow 95% (£95,000), but the property only values up at £95,000 (once the
             You would have to come up with the balance of £4,750 on top of your £5,000
           survey is carried out). The lender will only lend you 95% of the £95,000 = £90,250.
             deposit. You could, of course, ask the seller to reduce the selling price to the
           You would have to come up with the balance of £4,750 on top of your £5,000
             valuation of £95,000. Some will and some won’t!
           deposit. You could, of course, ask the seller to reduce the selling price to the
           valuation of £95,000. Some will and some won’t!

 what can I do if I have a poor credit-history?
 what can do if have a poor credit-history?
what can I Ido if I Ihave a poor credit-history?
   Can I still get a mortgage? The answer to this is that it depends. It is very likely that the
   Can I still get a mortgage? The answer to this is that it depends. It is very likely that the answer will be yes,
                      yes, but there than if more restrictions than if and in
   answer will be more restrictions will beyou had a clear credit historyyou had a clear credit history and
Can I thereget a mortgage? The answer to this is that it depends. It is extreme cases, the answer
   but still will be                                                                 very likely that the
   in extreme cases, the answer may be no.
answer will be yes, but there will be more restrictions than if you had a clear credit history and
   may be no.
in extreme cases, the answer may be no.
      you have a poor (adverse) credit history or if you have current credit problems, this affect
   If you have a poor (adverse) credit history or if you have current credit problems, this will definitely will your
   If
                affect                                          history can be –
   definitely options.your mortgage options. Poor credit number of things caused by a number of
   mortgage             (adverse) credit can be or if you a
If you have a poor Poor credit history historycaused by have current credit County Court Judgements
                                                                                       problems, this will
                                                                   on payments for to mobile from
   things – County Court Judgements (CCJ’s), defaults or loan repayments anything phonecredit-
   (CCJ’s), affect your mortgage anything from credit history can be caused by a number or hire-
definitely defaults on payments foroptions. Poorcredit- card                                               of
                                                                          agreements, mortgage arrears
   card or loan repayments to mobile phone or hire-purchase a poor credit-history
   purchase agreements, Judgements (CCJ’s), defaults on take
things – County Court mortgage arrears bankruptcy. Lenders payments for anything very seriously. from credit-
   bankruptcy. Lenders take a poor credit-history very seriously.
card or loan repayments to mobile phone or hire-purchase agreements, mortgage arrears
   As part of their credit-scoring (see below) process, all lenders will carry out a credit-search using one of
bankruptcy. Lenders take a poor credit-history very seriously.
   the major credit-reference agencies (for example, process, all lender may carry out a credit-search
   As part of their credit-scoring (see below) Experian). Thelenders willhave a maximum level of poor
   credit of their credit-scoring (see below) defaults – but the level Experian). The lender may overall
   using one of the major credit-reference agencies (for example,of
                                                                                  carry credit will affect your
As part that is acceptable to it – say, some minor process, all lenders willadverseout a credit-search
   have a maximum level of poor credit that is acceptable to it – say, some minor defaults – but
   ‘credit-score’. major credit-reference agencies (for example, Experian). The lender may
using one of the
   the level of adverse credit will affect your overall ‘credit-score’.
have a maximum level of poor credit that is acceptable to it – say, some minor defaults – but
the level of adverse credit will affect your overall ‘credit-score’.
           Thought: Most lenders will have their own views on adverse credit. These will vary
           from lender to lender but all major high-street lenders do take a dim view of an
        Thought: Most lenders will have their own views on adverse credit. These will vary
           adverse credit history. If you do have adverse credit, be prepared to come up with a
        from lender to lender but all major high-street lenders do take a dim view of an
           deposit, usually a minimum of 10%, and be prepared for less attractive mortgage rates
        adverse credit history. If you do have adverse credit, be prepared to come up with a
           and possible higher fees. Some of the ‘adverse’ deals may have ‘tie-in’s; for example,
        deposit, usually a minimum of 10%, and be prepared for less attractive mortgage rates
           they may offer you a 2-year fixed rate at, say, 7.5%, at the end of the 2 years you may
        and possible higher fees. Some of the ‘adverse’ deals may have ‘tie-in’s; for example,
           have to go onto their variable rate, which may be higher, plus an additional
        they may offer you a 2-year fixed rate at, say, 7.5%, at the end of the 2 years you may
           percentage, say, .45%. The penalties to leave the lender for another company offering
        have to go onto their variable rate, which may be higher, plus an additional
           a more attractive rate may be quite steep. The options open to you will depend on the
        percentage, say, .45%. The penalties to leave the lender for another company offering
           scale of your adverse credit history. You will also likely only be able to borrow up to
        a more attractive rate may be quite steep. The options open to you will depend on the
           85%, requiring you to come up with at least 15% deposit.
        scale of your adverse credit history. You will also likely only be able to borrow up to
        85%, requiring you to come up with at least 15% deposit.
   There are lenders who consider adverse credit credit cases and some lenders who deal
   Thereare lenders who will will consider adversecases and some lenders who deal specifically in this
   market – known as market – (or non-standard) credit (or non-standard) credit market’. The major
   specifically in thisthe ‘adverseknown as the ‘adversemarket’. The major high-street lenders will only
There are lenders who will consider adverse credit cases and some lenders who deal
   accept, if any, very minor only accept, if
   high-street lenders willcredit problems. any, very minor credit problems.
specifically in this market – known as the ‘adverse (or non-standard) credit market’. The major
   What should I will
high-street lendersdo? only accept, if any, very minor credit problems.
 What should I do?
 If you are keen buy but think that that you have some current current adverse may want to contact
 If you are keen to to buy but think you have some past or past oradverse credit, you credit, you may
 one of the credit I do?
What should referencethe credit(www.experian.co.uk, for example). You need to be completely honest
 want to contact one of agencies reference agencies (www.experian.co.uk, for example).
   with need to be buy but because anything on some past              current adverse credit, you your
If you are keen to(or lender)think that you have your records orlikely to be found out. By having may credit-
   You your adviser completely honest with your adviser (orislender) because anything on your
   report contact one of the credit reference agencies (www.experian.co.uk, will be able to for narrowing
want to your adviser will be able to discard those lenders that will definitely not lend to you,example).down
   records is likely to be found out. By having your credit-report your adviser
               be completely honest with your adviser (or lender) because anything on your
You need toare likely to.
   those who
   discard those lenders that will definitely not lend to you, narrowing down those who are likely
records is likely to be found out. By having your credit-report your adviser will be able to
   to.
discard those lenders that will definitely not lend to you, narrowing down those who are likely
to.
 BFPO Addresses                    Home Buying / Mortgage Guide                                                   11
 Many times, when trying to credit-check a proposed application, a lender cannot carry out a
BFPO Addresses applicant has been at a BFPO address for a number of years (many
 full check because the
BFPO Addresses
Many times, when trying to credit-check a proposed application, a lender cannot carry out a full check
because the applicant has been at a BFPO address for a number of years (many years, in some cases)...
or has never had any credit, therefore, no credit ‘trail’ exists. We can usually get round this by providing
full details of the postings, addresses, time at them etc, backed up by written confirmation from a CO or
other person in authority who can verify the information. As for the lack of a credit ‘trail’, again, we can, by
confirming in writing the way the applicant runs their finances, usually get around this anomaly. It is not a
major problem in securing a mortgage.

Important: Every time a lender views your credit-file they leave an electronic ‘footprint’ on it – this
lowers your overall credit rating and can be the difference between getting a reasonable mortgage
deal and having to settle for a less attractive deal. By having your credit-file available for your adviser
at the outset – the adviser will be able to keep the amount of time your file has to be viewed to a
minimum, reducing the ‘footprints’ that have to be left.

It is not my fault!
You may find that a lender has declined you due to adverse credit but you know that you have never had
any – how could this be? It is possible that somebody at your address (current or previous) has had credit
problems and that the lender’s search is tying this to you. If this has occurred, you need to explain to the
lender, or via your adviser (if you are using one), that you are completely confident that you have never had
any past, or current, problems with your credit and you should ask the company to look into it in more depth.
There are no guarantees that it will change its mind but we have seen lenders reverse their original negative
decisions.

A poor credit history can come about for a number of reasons. You may have moved location and direct
debits/standing orders for loan/credit card/car finance, etc. may have been affected and payments not made
when they should have been. You may have switched bank and, again, payment directives may have been
affected and payments not made when they should have been, especially with so much movement between
married quarters.

Whenever you are notified by a credit card company/finance company/mobile phone company, etc. that your
payments seem to be adrift, you should act on it immediately. Always take the names of the people you are
dealing with and the exact time and date of each conversation as this information could help you in the future.

What if I have debts?
There are no longer any lenders who will allow existing debt to be added to a new mortgage. Instead, your
annual debt (credit-cards, loans, hire purchase – even CSA payments) will be deducted from your annual
salary before the lender calculates what they will be willing to lend.



choosing an adviser
If you are ‘going it alone’ you will need to organise everything yourself. This guide is based mainly on the
premise that you are using an Independent adviser. Ideally you should look for an adviser who is offering a
complete ‘package’, that is to say, they will arrange everything for you – solicitor (unless you have your own),
provide free background survey information on as many properties as you see until you find ‘the’ property.
Once you have found ‘the’ property they should advise on the most suitable survey, they should deal with the
selling agents on your behalf throughout, put your offer in on the property, research the whole UK mortgage
market to find the best and most suitable mortgage deal for your circumstances, they should provide
Independent advice on any mortgage-related insurances that may be required. Basically, they should take
you through the whole mortgage process, as effortlessly (for you) as possible – right up until you receive the
keys to your new property.



                                         Home Buying / Mortgage Guide                                              12
surveyor – gets paid for their services, therefore, you have every right to expect – and to
demand if necessary – the very best level of service possible – throughout.

To be sure of getting the best advice…and having every possible mortgage option looked at
for you…make sure that any/all advice you get is Independent. To ensure that any mortgage
advisers you are talking to are registered with the Financial Services Authority (FSA) and,
therefore, regulated, ask them for the FSA number – a – from your adviser to the them when
Remember: Everybody involved intheir mortgage process six digit number given to surveyor – gets
paid for their services, therefore, you have every rightto www.fsa.gov.uk/registernecessary – the
they receive their authorisation from the FSA. Go to expect – and to demand if and put their
number level search box – it should bring up
very bestin the of service possible – throughout. their details and confirm that they are indeed
registered.
To be sure of getting the best advice...and having every possible mortgage option looked at for you...make
Your adviser should give you a Combined Initial Disclosure Document (CIDD) at the very
sure that any/all advice you get is Independent. To ensure that any mortgage advisers you are talking to
outset of your dealings with Services Authority (FSA) and, therefore, regulated, – independent FSA
are registered with the Financial him. The CIDD will detail exactly his ‘status’ ask them for theiror tied
to a particular company. given to them when they receive their authorisation from the FSA. be looking
number – a six digit number To get the most comprehensive advice you should alwaysGo to
for independent advice. The CIDD will also the search box – it should bring up their details and
www.fsa.gov.uk/register and put their number indetail the advice types of advice that the adviser is
allowed to provide.indeed registered.
confirm that they are
An important document.
Your adviser should give you a Combined Initial Disclosure Document (CIDD) at the very outset of your
Dealing with an independent mortgage adviser
dealings with him. The CIDD will detail exactly his ‘status’ – independent or tied to a particular company. To
If you most comprehensive advice you should an Independent adviser there are a The CIDD
get the do decide that you are going to use always be looking for independent advice.number ofwill also
questions you types of ask of him:
detail the advice want to advice that the adviser is allowed to provide an important document.

Dealing with an independent mortgage adviser service and ask him to confirm that he
          You should ask what charges he makes for his
          does that you are going UK mortgage market before making number of questions you want
If you do decidelook at the whole to use an Independent adviser there are a his recommendation. You
          should also ask him to confirm that any advice he may offer on mortgage-related
to ask of him:
          insurances is charges he makes for
•	 You should ask what also independent. his service and ask him to confirm that he does look at the
     whole UK mortgage market before making his recommendation. You should also ask him to confirm that
           You he may offer on mortgage-related insurances is also if he offers
     any adviceshould ask if he only offers mortgage advice orindependent. a home-buying
•	         ‘package’. Most advisers will be able or if he a complete service. The service should
     You should ask if he only offers mortgage adviceto offer offers a home-buying ‘package’. Most advisers
           mean that he complete service. The service stage of the home-buying process – leaving
     will be able to offer a will take you through everyshould mean that he will take you through every stage
            home-buying process – information that may be required.
     of theyou only to supply anyleaving you only to supply any information that may be required.

An adviser will normally charge of between £250-£500 for his services but it does but a lot of take
An adviser will normally charge a fee a fee of between £250-£500 for his–services – take it doeseffort
a lot from you – especially you are a first-time you are a first-time buyer.
away of effort away from if you– especially if buyer.


       Thought: You should ask the adviser for his fee – in writing – before you proceed
       with his services (I have come across a case where people buying their council
       houses were being charged £2,000 by an adviser – this fee was being added to their
       mortgage, and then paid by the acting solicitor - quite legally). Be wary of advisers
       charging a percentage of what you are borrowing – say, for example, 1% - this can be
       expensive. You should also get confirmation, at the outset, that the fee will not be
       charged until – and unless – you receive a formal offer of mortgage from a lender. In
       the event that your application is declined or you do not proceed – for any reason –
       there should be no fee. Remember – get all this in writing at the outset.

•	         You also get a good a good idea of the timescale, finish. Although no adviser can be
     You shouldshould also getidea of the timescale, from start to from start to finish. Although no
           adviser can be expected to he should be able to give an approximation.
     expected to give an exact timescale, give an exact timescale, he should be able to give an
•	   You will want to know what you can borrow and, therefore, what you can aim at buying for. The adviser
           approximation.
     will be able to give you a very good idea once he has asked you a number of questions.
          You will want to know what you can borrow and, therefore, what you can aim at
          buying for. The adviser will be able to give you a very good idea once he has asked
it pays to have all the facts before you go ahead
          you a number of questions.


Facts such as:
•	 All your expected home-buying costs.
                                    Home Buying Mortgage Guide
•	 All the expected fees, in writing. (legal fees may /vary a little, up or down, but you should have a very good
                                                                                                             13
    idea of what to budget for).
•	 The timescale.


                                        Home Buying / Mortgage Guide                                          13
         The timescale.

         The details of the various stages of the mortgage process, when they are likely to be
         encountered and when they have to be paid for.
Budgeting for a new mortgage
It is crucial that you budget for taking on such a large financial commitment. Remember that
any financial commitments you are about to take on must be more than affordable – they
must be comfortably affordable.
•	 The details of the various stages of the mortgage process, when they are likely to be encountered and
  when they for a new for.
Budgetinghave to be paid mortgage
It is crucial some guidance on taking together budget before you even start the mortgage
If you want that you budget for puttingon such aalarge financial commitment. Remember that
any financial commitments you are website take on must be more Services Authority at
process, you can new mortgage
Budgeting for ago to a very good about to set up by the Financialthan affordable – they
www.moneymadeclear.fsa.gov.uk/tools/budget_calculator.html (or you that any financial
It is crucial that you budget for taking on such a large financial commitment. Remembercan call the FSA
must be comfortably affordable.
consumer advice line on to take on 1234). more than page brings up a very comfortably affordable.
commitments you are about 0845 606must be This web affordable – they must be good calculator.
You simply complete the various boxes and then hit the before you even start the then take
If you want some guidance on putting together a budget calculate button. You can mortgage
process, some budget on putting you (or post copy if dealing start the mortgage process,
your wantyou can go to along good website setaup by the Financial distance, which many
If you calculated guidancea verywithtogether a budget before you even at aServices Authority at you
www.moneymadeclear.fsa.gov.uk/tools/budget_calculator.html (or a mortgage the FSA
Forces personnel do) when you by ready to discuss your situation with you can call adviser.
can go to a very good website set upare the Financial Services Authority at www.moneymadeclear.fsa.gov.
consumer advice line on 0845 606 1234). This FSA page brings up a very good calculator.
uk/tools/budget_calculator.html (or you can call the web consumer advice line on 0845 606 1234). This
You simply affordability calculator. You simply completecalculate button. and then hit the calculate
  Use the complete the various boxes and then – the the various boxes You can then take
web page brings up a very goodcalculator – visit hit www.mortgages4forces.co.uk –
your calculatedto get an idea of what you with if dealingeach month.
                  budget along with you (or post a can afford a a distance, which many
button. You can then take your calculated budget along copyyou (or post at copy if dealing at a distance,
Forces personnel do) when you are ready to discuss your situation with a mortgage adviser.
which many Forces personnel do) when you are ready to discuss your situation with a mortgage adviser.
Planning ahead and always allowing some leeway for emergencies and unforeseen
                     What can you afford to pay monthly for your mortgage?
 Use the affordability ‘quick-guide’ – visit – www.mortgages4forces.co.uk –
circumstances will standthe calculator calculator to get a rough idea – visit
                    Use you in good stead.
                  to get an idea of what you can afford each month.
                                 www.mortgages4forces.co.uk
       Thought: When putting down your various costs in your budget planner, always put
.
       down a and more allowing some leeway for emergencies and unforeseen circumstances will
Planning ahead little always than you actually spend on your various outgoings. Then you will stand
Planning ahead and always allowing some leeway for emergencies and unforeseen
       have built
you in good stead.a certain ‘safety’ factor into your calculations
circumstances will stand you in good stead.

.   Thought: When putting down your various costs in your budget planner, always put
    down a little you than you actually spend
How long shouldmore take the mortgage for? on your various outgoings. Then you will
     considering what mortgage term to have, calculations
Whenhave built a certain ‘safety’ factor into your do take into account things such as:

Your current age(s).
How long should you take the mortgage for?
How long should you take the mortgage for?
When long your income will continue for. do take into account things such as:
How considering what mortgage term to have,
When considering what mortgage term to have, do take into account things such as:
Your current age(s).
Whether or not your income will rise or fall.
Your current age(s).
•	 How long your income will continue for.
When youyour due to retire. will rise or fall.
             or
•	 Whetherarenot your income If the mortgaged is lasting past retirement age, will you still be
How long         income will continue for.
•	 When you are due to retire. If the mortgaged is lasting past retirement age, will you still be able to afford
able to afford your payments?
    your payments?
Whether or not your income will rise or fall.
If you are using an independent adviser, he will be able to provide you with guidance on this
If you are using an independent adviser, he will be able to provide you with guidance on this matter.
matter.
When you are due to retire. If the mortgaged is lasting past retirement age, will you still be
able to afford your payments?
       Thought: Remember that the companies providing your insurance cover (Life
        are using an independent adviser, he will be able Cover, etc.) will have age limits this
If you insurance/Critical Illness Cover/Income Protection to provide you with guidance on and
matter.these should be checked to ensure that cover is in place as long as you have a liability.
14                                Home Buying / Mortgage Guide
       Thought: Remember that the companies providing your insurance cover (Life
the agreement-in-principle (AIP) and credit-scoring
       insurance/Critical Illness Cover/Income Protection Cover, etc.) will have age limits and
       these should be checked to ensure that cover is in place as long as you have a liability.
                                     Home Buying / in the Financial Questionnaire (known as a Fact-Find),
After going over all your personal and financial detailsMortgage Guide
14
your adviser should by now have given you a better idea of how much you can borrow and what type of
mortgage may suit you best. When deciding on the best mortgage for you some factors you should take into
account are:

* Your attitude to risk. * Affordability (got to be comfortably affordable). * Where’s your deposit coming from
(LSAP, savings?). * Type of deal you want to opt for – discount/fixed-rate/capped-rate/cashback deal – your
adviser will explain all your options to you.




                                        Home Buying / Mortgage Guide                                           14
using his daily updated software systems, which show practically all of the current mortgage
deals available in the UK mortgage market, will source the most suitable current deal for you
(I’ll explain why I have highlighted the word current a little further on). Your adviser will then,
with your permission, aim to obtain an Agreement-in-Principle (AIP) from that lender. The
information that the lender will require is:

          Your current and, if you have been in residence for less than 3 years, your previous
An Independent adviser will then go through all the information you have given him and, using his daily
          addresses;
updated software systems, which show practically all of the current mortgage deals available in the UK
          Your income;
           market, will source the credit-cards or child maintenance etc;
mortgageDetails of any loans, most suitable current deal for you (I’ll explain why I have highlighted the
          Details of your on). Your adviser will then, time in permission,
word current a little further employment – length ofwith yourthe job etc; aim to obtain an Agreement-in-
          (AIP) from that lender. The information that the lender will require is:
Principle Plus one or two other details.
•	 Your current and, if you have been in residence for less than 3 years, your previous addresses;
•	 Your income; an AIP, as long as all the information you have given is accurate – and true –
Once you have
•	 Details of any loans, credit-cards or child maintenance etc;
if you see a property and need to get in with an offer quickly, or risk losing it, you are in a
•	 Details of your employment – length of time in the job etc;
position to do so. You’ll also know exactly how much you can borrow.
•	 Plus one or two other details.
The reason I stressed the word current above is because although the AIP may be with
Once you have an AIP, as long as all the information you have given is accurate – and true – if you see a
lender X, by the time you have found a property rates may have changed and a better deal
property and need to get in with an offer quickly, or risk losing it, you are in a position to do so. You’ll also
may now be available; your adviser will once more review the mortgage market to ensure that
know exactly how much you can borrow.
the original AIP is still best – if so he will now have it converted to a formal offer of mortgage –
if a better deal is now available he will simply apply for your formal mortgage to that lender
The reason I stressed the word current above is because although the AIP may be with lender X, by the time
you have found a property rates may have changed and a better deal may now be available; your adviser will
Once you have obtained the AIP the lender will then carry out a credit search.
once more review the mortgage market to ensure that the original AIP is still best – if so he will now have it
converted to a formal offer of mortgage – if a better deal is now available he will simply apply for your formal
Credit to that lender. agencies
mortgage reference Once you have obtained the AIP the lender will then carry out a credit search.
A credit search involves the lender contacting a credit-reference agency – such as – Experian
or Equifax. These agencies
Credit referenceagencies hold credit data on millions of people and can generally tell a
lender search involves the lender contacting credit-reference agency such as – Experian or Equifax.
A credit if a prospective borrower has hadaany credit problems in–the past. The credit problems
can range from very minor – the odd of people and can possibly due to a if a up in direct
These agencies hold credit data on millionsmissed payment, generally tell a lendermix prospective borrower
debits any credit problems posted at short notice and forgot to direct enough cash odd missed
has had– maybe you were in the past. The credit problems can range from very minor – theto whichever
account your direct-debits came from, for example – right up to bankruptcy. This is why it to
payment, possibly due to a mix up in direct debits – maybe you were posted at short notice and forgot is
so important to be whichever account your direct-debits came from, for example – right up to bankruptcy.
direct enough cash tocompletely honest with your adviser and your prospective lender as any
past bad it is so important to be to show up in the search.
This is whycredit history is likely completely honest with your adviser and your prospective lender as any
past bad credit history is likely to show up in the search.
If any adverse credit was very minor, it may not even affect your mortgage prospects very
much. However, ifwas very minor, it may not even affect yourbig impactprospects mortgage options. if
If any adverse credit it is fairly major, it is likely to have a mortgage on your very much. However,
Even with fairly major past credit impact on your mortgage possible to with fairly major past credit
it is fairly major, it is likely to have a bigproblems it may still be options. Evenobtain a mortgage – but
you should expect to pay more.
problems it may still be possible to obtain a mortgage – but you should expect to pay more.

.      Thought: Important. Already mentioned earlier – but so important. You need to be
       aware that every time a search of your credit file is carried out it leaves an electronic
       ‘footprint’. Too many footprints, over a short time, can reduce your credit-score. So, if
       it is a close run thing whether the lender lends or not, the amount of footprints could
       just be the deciding factor. Just be aware of this if you, or your adviser, try a number of
       lenders for your AIP       Home Buying / Mortgage Guide                                   15

Do not confuse a credit check with a credit score!
Once the lender has carried out its credit checks, it will be able to credit score your application for an AIP.
Most lenders have their own credit-scoring criteria. Obviously, the details the lender gets from the credit-
check play a major part in this credit scoring but so do some other factors, such as – length of time you’ve
been in your job, your salary, your outgoings, your age, the amount required against the value of the property,
whether you have a landline (believe it or not) for your home phone number – not just a mobile – and a
number of other factors. There is much more involved in getting a mortgage than just having a clean
credit history!

Having credit scored the AIP application, the lender can then give a good idea of the amount it may be willing
to lend, based on the information you have provided so far (and assuming that further checks it will do on
receipt of a full application, such as employers references, landlord/existing lender’s references (if relevant)
and proof of residence are OK), and, more importantly, that it is willing to lend.

                                         Home Buying / Mortgage Guide                                           15
 You can go directly to one of the two major credit agencies, Experian and Equifax, if you have any doubts
about your past credit history and you want to have the full facts before approaching an adviser or lender. By
showing your credit report to your adviser, they will have a very good idea of who will and who won’t lend –
this will save too many ‘footprints’ being left on your file. If you have access to the internet, simply go to
www.experian.co.uk or www.equifax.co.uk.

If you do not have access to the internet, you can contact Experian at Talbot House, Talbot Street,
Nottingham, NG80 1TH and Equifax at Capital House, 25 Chapel Street, London, NW1 5DS. Both companies
will normally charge around £2 for your credit report.

Electoral Roll
The lender is also likely to check that you are on the Electoral Roll (a record of who is registered to vote) –
generally it makes things a little easier if you are on the roll. By the very nature of their jobs, many Service
personnel are not on the Roll.

You can easily register by going to – www.direct.gov.uk. In the search box at the top of the web page, put
in ‘Voting’ and this will take you to a page where you simply scroll down until you find ‘Registering to vote’
and it will take you through the process. The site will also give you information on finding out if you are already
registered. If not registered – it would be a good idea to do so.



buying to let (BTL)
Many serving Forces personnel that I have come across over the years, especially the single ones, say they
have not bought a property because they were not sure where they would eventually want to live and that
they were moving around with the Forces so much. Many personnel coming to the end of their Service
careers, who are only now starting to consider buying a property, wish they had bought years ago, mainly
because the property would, generally, have increased in value, the amount outstanding (assuming it was on
a Repayment basis) would have reduced and, had they let it, the mortgage (and possibly some other costs –
insurance etc) would have been paid for them – leaving them a few rungs further up the property-ladder than
they currently are.

The attraction of BTL’s, if done sensibly, is that you don’t have to live in them – they are purely an investment,
allowing you, wherever you are based, to get on the property ladder now. It is important to do your homework
when considering a BTL. Find an area where people generally rent – students, near a hospital, near a military
base (Service personnel who want to live away from the barracks), for example. It is also important that you
can be as sure as possible that the property will let – no guarantees obviously, although some letting agencies
will offer a rental guarantee – of course you’ll pay extra for this

Some differences between residential and buy-to-let mortgages
The main differences between residential and BTL mortgages are:
•	 The interest rates are almost always higher for BTL’s than residential (because they are deemed to be
    investment properties). Where a lender may offer a fixed rate of, say, 6.25% for a residential, it may offer,
    say, 7.25% for a BTL.
•	 Whereas a lender may lend up to 90% (95% at a push) for a residential mortgage, the usual lending on a
    BTL is between 80-85%. The rate offered would generally reflect the amount of deposit being put down.
    This means that you must come up with a deposit of between 15-20%.
•	 Many BTL’s are taken on an Interest-Only basis to keep the monthly repayments down, although,
    if affordable you should always aim to have them on a Repayment basis – have the outstanding
    mortgage reducing.
•	 Whereas residential mortgages are based on affordability and your salary, BTL lending is generally based
    on affordability and expected rental income. Different lenders have different lending criteria and some may
    even ask for proof of income, though these lenders are relatively rare.


                                         Home Buying / Mortgage Guide                                              16
The pros of BTL’s
•	   BTL’s are a good way to have an investment – normally over the mid-to long term – where somebody else
     pays the mortgage for you.
•	   Because Forces personnel have accommodation provided for them a BTL will let you get onto the
     property ladder, whilst the mortgage is paid for you allowing you to save towards buying your main
     residence some time in the future. You may even, when you are ready, want to move into the BTL
     property, which has, generally increased in value, or to sell and have a good deposit towards your
     main residence.
•	   Somebody else is paying your mortgage for you and, possibly, giving you some extra on top as well!

The cons of BTL’s
•	   If you have any period when there is no tenant in the property, and you have no rental income coming in,
     you are still responsible for the mortgage payments.
•	   Some lenders will insist that the property is let through a recognised letting agent and you will have to pay
     fees to the agent – normally between 10 – 20%
•	   You may want to move into the property at short notice but may be restricted by the tenant’s lease.
•	   Different lenders may have different restrictions on who you may or may not let to. For example, they may
     not allow multiple tenancies, Housing Benefit tenants, tenants having diplomatic immunity or sub-letting.
•	   Lenders do not usually allow longer-term leases – three years, for example. The reason for this is because
     if you default on the mortgage and they have to repossess, they may not be able to get their hands on
     their own property due to a sitting tenant with a longer-term lease.
•	   You may be liable for Income Tax or Capital Gains (CGT) Tax

Buy-to-let Taxation
You should bear in mind that, if you make any kind of profit on the income from your BTL – after the mortgage
(and certain other outgoings) has been taken into account, you may be liable for Income Tax at your nominal
rate. When you come to sell you may also be liable for Capital Gains Tax on any profit (you do have a CGT
allowance to offset this)

For full details on this topic visit the HM Revenue and Customs Site at – www.hmrc.gov.uk.

Permission to Let
This where a lender will be prepared to lend on a ‘Residential’ basis, that is to say, a more favourable basis
than a BTL basis – allowing you let the property because it is your ultimate aim to have it as your main
residence but, due to Service responsibilities – postings etc, you cannot yet take up residence. Not every
lender will offer this option.



shared ownership
If you cannot find a property that is in your price range, you may want to consider shared ownership – this is a
mix of buying and renting.

How does it work?
With shared-ownership, you buy a share of the property, for example 50% (but it can be as little as 25%), and
you pay rent on the remaining share that you do not own. Gradually, when it becomes affordable, you can buy
further shares until you eventually own your home outright.




                                         Home Buying / Mortgage Guide                                            17
How does it work?
With shared-ownership, you buy a share of the property, for example 50% (but it can be as
little as 25%), and you pay rent on the remaining share that you do not own. Gradually, when
it becomes affordable, you can buy further shares until you eventually own your home
outright.

      Example: You see a housing association property with an asking price of £100,000.
      You want to buy 50% of this and pay rent on the remaining 50%. The association is
      happy with this and your next step is to find a lender who will provide you with a
      mortgage for the 50% (£50,000). Most lenders will ask you to come up with a deposit,
      say 5% of £50,000 = £2,500. You would provide £2,500 and the lender would lend the
      balance of £47,500.

      Note: You have to remember that property prices can go up and down. This could
      mean that you may have to pay more for buying additional shares or you may have to
      sell at a price less than you originally paid.


Who offers these properties for sale?
Who offers these properties for sale?
Normally housing association, a housing society or a non-profit making housing company (please see
Normally a a housing association, a housing society or a non-profit making housing company
(please see www.shared-ownership.org.uk for
www.shared-ownership.org.uk for more information). more information).


      Note: If you want to move before you have bought the property outright, you must tell
      the housing association or society. The association has the right to buy your share of
      the house from you at its market value. If it does not want to do this, it will sell the
      house jointly with you. If you own the house completely, then you may sell it on the
      open market.




your solicitor
your solicitor
As part of any ‘package’ from an adviser, he should be able to arrange a solicitor to act for you (unless you
As part of any ‘package’ should, adviser, he conversant with to arrange a solicitor to act for
have your own). The solicitorfrom anideally, be fullyshould be able LSAP (if you are aiming to use this) and
you (unless you if required. own). The solicitor should, ideally, legal fees in writing...at the outset,
Power of Attorney, have yourYou should be able to get your expectedbe fully conversant with LSAP or
(if you a good idea to use they and Power of Attorney, if required. You should Guide).
at least are aiming of what this)are likely to be (see chart of solicitor’s fees at end ofbe able to get
your expected legal fees in writing…at the outset, or at least a good idea of what they are
You should(see to be keptsolicitor’s to on theon of progress of side of things (known as the
likely to be expect to of fully up to date date progress of the
You should expect chartbe kept fully upfees at endthe Guide).legal the legal side of things
(known as the conveyancing), throughout – this may be adviser. your mortgage adviser. Your
conveyancing), throughout – this may be through your mortgage throughYour solicitor should be ready to
solicitor should be you may answer any questions reason
answer any questionsready to have, at any time – within you may have, at any time – within reason


As space this Guide is limited - you you can contact me direct for a sheet – The conveyancing
As space inin this Guide is limited -can contact me direct for a separate separate sheet – The
process – a step-by-step guide to the whole legal process. whole legal process.
conveyancing process – a step-by-step guide to the

18                               Home Buying / Mortgage Guide
      Thought: Even how you offer for a property in Scotland is different to that in
      England/Wales. In Scotland, in the majority of cases, properties are on the market at
      Offers-Over and, if interested in one, you must ‘note-interest’, via your solicitor as
      soon as possible, to be in the running to have your offer considered. In England/Wales
      the buyer can put their offer in directly with the selling agent.
      For further information - contact me for a Fact-sheet, call our free-phone number 0845
      612 3336 or e-mail your request to frank@nbhm.com


Scottish conveyancing is different to England/Wales – for further information our can get our
Scottish conveyancing is different to England/Wales – for further information you can getyou Fact-sheet or
contact – (England/Wales) – www.lawsociety.org.uk. For Scotland – www.lawscot.org.uk. –
Fact-sheet or contact – (England/Wales) – www.lawsociety.org.uk. For Scotland
www.lawscot.org.uk.




surveys                                Home Buying / Mortgage Guide                                          18
Fact-sheet or contact – (England/Wales) – www.lawsociety.org.uk. For Scotland –
Fact-sheet or contact – (England/Wales) – www.lawsociety.org.uk. For Scotland –
www.lawscot.org.uk.
www.lawscot.org.uk.
www.lawscot.org.uk.



surveys
surveys
surveys
You now have your Agreement-in-Principle (AIP) and you have a good idea of the expected
You now have your Agreement-in-Principle (AIP) and you have a good idea of the expected
You now have your Agreement-in-Principle (AIP) and you have a good idea of the expected
value of the property (your adviser should have got you this background survey information
value of the property (your adviser should have got you this background survey information
You now have property (your adviser should have got you this background survey value of the
                                             (AIP) and you       good idea of the expected information
value of the your Agreement-in-Principle sell for (very have a a different price to that being asked
free of charge) and what it is likely to                   often
free of charge) and what it is likely to this for (very often a information free of charge) andasked
propertycharge) and shouldithave got you sell for (very often a different price to that being asked is
free of (your adviser what is to get your background survey and decide on the type of what it
by the seller). You now need likely to sellsurvey organiseddifferent price to that beingvaluation
by the seller). You now need to get your survey organised and decide on the type of valuation
likely to seller).(very often aneed to get your survey organised and decide on the type getvaluation
by the sell for You now different price to that being asked by the seller). You now need to of your survey
(survey) – your adviser should recommend most suitable type of survey and then organise
(survey) – your adviser should recommend most suitable type of survey and then organise
organised – your adviser shouldof valuation (survey) – suitable type of survey and then organisetype
(survey) and decide on the type recommend most your adviser should recommend most suitable
everything for you.
everything for you.
of survey and then organise everything for you.
everything for you.
      Thought: You are likely to look at a number of properties before finding ‘the’
      Thought: You are likely to look at a number of properties before finding ‘the’
      Thought: you are likely to for a survey on each of these would add up to a
      property, if You were to pay look at a number of propertiesitbefore finding ‘the’ tidy sum
      property, if you were to pay for a survey on each of these it would add up to a tidy sum
      property, if you were to pay for a survey are each of theseadviser to ensure that he sum
      – that’s why it is so important when you on choosing an it would add up to a tidy will
      – that’s why it is so important when you are choosing an adviser to ensure that he will
      – that’s free it is so important when you are on as many adviser to ensure that see
      get you why background survey information choosing an properties as you may he will
      get you free background survey information on as many properties as you may see
      get youyou actually need survey information on as many properties as you may see
      before free background to have a survey instructed.
      before you actually need to have a survey instructed.
      before you actually need to have a survey instructed.

Types of survey
Types of survey
Types ofto some recent industry estimates, only one in five homebuyers has
Types of survey
According survey
According to some recent industry estimates, only one in five homebuyers has an in-depth an in-depth
                                                                                         survey (known
According to some recent industry estimates, only one in five homebuyers has an in-depth
According to some Homebuyers estimates, only one in five property before they in-depth
survey (known as arecent industry Report) done before theythe homebuyers has anout of five
                                                       to check make the purchase. Four make the
as a Homebuyers Report) done to check the property to check the property before they make the
survey (known as a Homebuyers Report) done to check the property before they
survey (known out Homebuyers Report) done
purchase. rely as a of five basic valuation survey commissioned by valuation survey make the
homebuyersFourpurely on thehomebuyers rely purely on the basictheir lender and fail to commission
purchase. Four out of five homebuyers rely purely on the basic valuation survey
purchase. Fourby theirfive homebuyers rely purely on the basic valuation survey
commissioned out of lender
their own, far more detailed report.and fail to commission their own, far more detailed report.
commissioned by their lender and fail to commission their own, far more detailed report.
commissioned by their lender and fail to commission their own, far more detailed report.
       Thought: You may hear one person call your survey ‘a survey’ and somebody else
       Thought: You may hear one person call your survey ‘a survey’ and somebody else
       Thought: You may hear A valuation call your survey ‘a survey’ and somebody else
       refer to it as ‘a valuation’. one person is generally organised by the lender for the
       refer to it as ‘a valuation’. A valuation is generally organised by the lender for the
       refer to it as ‘a valuation’. is generally is generally organised by the lender for good
       lenders benefit. A survey A valuation arranged by the buyer and gives him a the
       lenders benefit. A survey is generally arranged by the buyer and gives him a good
       lendersjust whatA survey is generally arranged byis in.buyer and gives him a good
       idea of benefit. condition the proposed property the
       idea of just what condition the proposed property is in.
       idea of just what condition the proposed property is in.
A plus point of having a more in-depth survey carried out is that it is much more likely to
A plus point of having a more in-depth survey carried out is that it is much more likely to
A plus point ofof having a more in-depth survey if out is that it is muchitmore likely problems, the
A plus point having a more in-depth survey and it does highlight is much to detect any problems
detect any problems than a basic surveycarriedcarried out is that any major more likely to
detectbasic problems than a basic survey majorif it does highlight any major problems, the the
detect any be able to ifrenegotiate survey and if it does highlight may be able to renegotiate
than a may problems than a basic the any andprice by muchbuyerany major likely valuethe the
buyer any survey and it does highlight asking problems, the more than the problems, of
buyer may be able to renegotiate the asking price by much more than the likely value of the
asking price by much more than the likely value of the fault. much more than the likely value of the
buyer
fault. may be able to renegotiate the asking price by
fault.
fault.
      Thought: The cost of a survey is insignificant in terms of the cost of the fault that may
      Thought: The cost of a survey is insignificant in terms of the cost of the fault that may
      Thought: The cost future savings insignificant inof any faults should make for that may
      be found…and the of a survey is the detection terms of the cost of the fault you!
      be found…and the future savings the detection of any faults should make for you!
      be found…and the future savings the detection of any faults should make for you!

The cost of a valuation depends on the type of survey you want and the estimated value of the property.
The charges are usually on a sliding scale – increasing as the value of the property increases.
                                     scale Buying / Mortgage Guide
(contact Mortgages4Forces™ forHomeof survey fees).
                                    Home Buying / Mortgage Guide
                                                                                                            19
                                    Home Buying / Mortgage Guide                                            19
                                                                                                            19
Basic (Scheme One) valuation.
For any property with an NHBC Guarantee, a basic valuation will probably suffice because this guarantee
covers newly-built properties for ten years. For properties that are relatively new – say 10 – 15 years – a basic
valuation may suffice, i.e. it will probably suffice for the lender’s purposes. This type of survey, as the name
indicates, is a very basic valuation of the property, usually based on not much more than a walk around and
observation by the surveyor, his knowledge of the area and of similar recent valuations in that area. But, for
peace of mind you may want to pay the extra to have a Homebuyers Report carried out.




                                        Home Buying / Mortgage Guide                                           19
this guarantee covers newly-built properties for ten years. For properties that are relatively
new – say 10 – 15 years – a basic valuation may suffice, i.e. it will probably suffice for the
lender’s purposes. This type of survey, as the name indicates, is a very basic valuation of the
property, usually based on not much more than a walk around and observation by the
surveyor, his knowledge of the area and of similar recent valuations in that area. But, for
peace of mind you may want to pay the extra to have a Homebuyers Report carried out.

      Thought: Your adviser needs to confirm, before the survey is instructed, that
      whichever firm of surveyors you are using, are on the proposed lenders ‘panel’. Most
      lenders have a panel of surveyors that they are willing to accept reports from. If the
      survey is instructed and the surveyor is not on the lender’s panel, you will have to
      have another survey instructed – and pay again! An easy rule to follow is to use the
      big, national networks of surveyors as they are generally on most panels. Some
      lenders do insist on instructing the valuations themselves. It is best to instruct a survey
      after the offer is made as you can make the offer ‘subject to a satisfactory survey’.


Homebuyers Report
HomebuyersReport
This is much more in-depth valuation and usually cost about twice as twice as much as the basic
This is aa much more in-depth valuation and usually cost about much as the basic valuation (contact
valuation (contact for scale of survey fees), but the cost survey fees), but the cost from surveyor to
Mortgages4Forces™Mortgages4Forces™ for scale of of any type of survey can varyof any type of
survey can type of survey is usually right for conventional of survey is are less than for years old. These
surveyor. Thisvary from surveyor to surveyor. This typeproperties thatusually right 150 conventional
properties that are less than 150 years old. for properties needing renovation, alterations or extensions.
‘middle-ranking’ surveys are not normally suitable These ‘middle-ranking’ surveys are not normally
suitable for properties needing renovation, alterations or major faults The survey covers the
The survey covers the property’s general condition and assesses extensions.in accessible parts of the
property’s general condition and assesses major faults in accessible parts of the property that
property that may affect its value.
may affect its value.
The Homebuyers Report will identify any urgent matters to be assessed before contracts are exchanged;
The Homebuyers Report inspections; any urgent matters to be assessed before contracts
recommendations for further will identify results of dampness testing; damage to timbers, including are
exchanged; rot; condition of damp-proofing, inspections; results of dampness purposes, the cost of
woodworm or recommendations for further insulation, drainage; and, for insurancetesting; damage to
timbers, including woodworm or rot; damage – of damp-proofing, insulation, drainage; and, for
reconstructing the building in the event of condition known as the reinstatement value.
insurance purposes, the cost of reconstructing the building in the event of damage – known
Important: Mortgages4Forces™ have negotiated a 15 - 20% discount on all surveys for Forces
as the reinstatement value.
Personnel – nationwide – with the largest groups of surveyors covering Scotland and England/Wales –
Important: Mortgages4Forces™ have negotiated a full 20% discount on all surveys for
see www.mortgages4forces.co.uk or call 0845 612 3336 for15 - details.
Forces Personnel – nationwide – with the largest groups of surveyors covering Scotland and
What if the property has problems?
England/Wales – see www.mortgages4forces.co.uk or call 0800 008 7870 for full details.
If your survey highlights any problems, the surveyor may put a ‘retention’ clause on the property. This means
that the surveyor will advise the lender to hold back (i.e. retain) some of the money you wish to borrow. For
What if the property has problems?
example, the survey may have shown up some very bad dry rot in the roof joists, which could cause major
If your survey highlights any problems, the surveyor may put a ‘retention’ clause on the
problems in the future, so the surveyor recommends that a timber specialist carries out a survey and makes
property. This means that the and cost will advise the lender to hold required standards. Say of
recommendations as to the nature surveyorof the work necessary to meet theback (i.e. retain) somethe
the money you wish to borrow. and you had hoped to borrow £120,000 in total, the surveyor could
estimate is for £5,000 worth of workFor example, the survey may have shown up some very bad
dry rot in the lender release £115,000 now and major problems in work has been the surveyor
advise thatthe roof joists, which could cause the balance once the the future, so carried out.
recommends that a timber specialist carries out a survey and makes recommendations as to
the nature and cost of the
What do you do now? work necessary to meet the required standards. Say the estimate is
for could go back of work and you had hoped and ask if £120,000 in total, the surveyor £5,000,
You£5,000 worth to the seller – via your solicitor – to borrowhe would reduce the asking price by could to
advise that the be done. This way you can carry on with the purchase (seller may have already carried
reflect the work tolender release £115,000 now and the balance once the work has beenbought and
out.
may be keen to keep the sale going through!) and then use the £5,000 you have saved to pay for the work.
An alternative is to ask the vendor to put right any defects highlighted in the surveyor’s report – to the required
What do you then the transaction can proceed.
standards – and do now?
You could go back to the seller – via your solicitor – and ask if he would reduce the asking
price by £5,000, to reflect the work to be done. This Report, may highlight a number of purchase
Your survey report, especially the more thorough Homebuyers way you can carry on with themajor and/or
(seller may have is a good opportunity to negotiate with to seller the to put everything right or to reduce
minor problems. Thisalready bought and may be keen the keep eithersale going through!) and then the
use the £5,000 you in a very strong position – the work. An alternative is to ask the thorough survey.
asking price. It puts you have saved to pay for hence the wisdom of paying extra for a more vendor to put

Home Information Packs – (HIP’s)
This is a good time to mention HIP’s. Introduced by the Government – any properties marketed in England
and Wales from 14th December 2007 will need a HIP. The Pack, provided by the seller, includes an Energy
20                                 Home Buying / Mortgage Guide
Performance Certificate, containing advice on how to cut carbon emissions and fuel bills. Also included are
documents such as a sale statement, searches and evidence of title.




                                        Home Buying / Mortgage Guide                                            20
Important: The HIP does not include a property condition report...so a survey is still required.

There is much, much, more to these packs but you can get all the relevant information from the Government’s
own site – www.homeinformationpacks.gov.uk/consumer.

Behind the scenes!
During the period following your offer being accepted, you may feel that very little is happening, but...your
solicitor will be carrying out their conveyancing ‘duties’ – doing all their checks. Your LSAP application (if
being used) will be getting processed at Centurion (Joint Personnel Administration Centre – JPAC). Your
adviser will be getting the survey arranged and instructing where copies have to be sent; he’ll also be keeping
the selling agents (and thus, the vendor) up to date on the progress of everything – throughout...and happy!
Your adviser will also research the market to provide you with impartial advice on any relevant mortgage-
relatevery little to do.



mortgage-related insurances
With such a huge financial commitment as a mortgage it obviously makes sense to ensure that should
anything happen to you (or your partner); the mortgage will be paid off. If you are single you may feel that
there is no need for life cover and that you are not worried that should you die the lender will simply retain the
property, alternatively you may want it to go to a family member.

Most mortgages, these days, are on a Capital & Interest (Repayment) basis – where the amount outstanding
decreases year by year. These are normally covered by Decreasing Term Assurance (DTA) – also known as
Mortgage Protection Cover (MPC) – where the level of cover also decreases so that, at any given time, the
outstanding amount on the mortgage is always covered. On the death of the policy holder the policy pays out
a lump sum from which the mortgage can be repaid. DTA is relatively inexpensive because it decreases in line
with the mortgage.

You have the option of having Critical Illness Cover (CIC) built into the policy – this is extremely valuable
cover as it pays out on diagnosis (whether curable or treatable) of a wide range of specified conditions –
cancer/heart attack/stroke/MS etc. It is estimated that there are roughly nine times more claims for the CIC
than for death.

If your mortgage is on an Interest-Only basis (maybe a BTL, for example) you would normally cover it with
Level Term Assurance (LTA) – where the level of cover remains the same for the chosen term (say – 25
years). You can also have CIC built into the LTA. LTA is more expensive than DTA because it remains the
same throughout the chosen term.

It is very important to take Independent advice on your insurances. I have just produced an illustration for a
couple in their late 20’s – the difference in cost, between cheapest and dearest quote...for the same cover...
is – over £17...per month – over 25 years...£5,100!

Important: Another point to bear in mind is that some companies are more ‘Forces- friendly’ than
others, when it comes to considering you for cover. Some of their Armed Forces Questionnaires ask
– ‘Are you categorically not deployable to an area of conflict?’ – not possible for anybody in the
Forces to confirm this! Others ask ‘Are you currently under orders to be deployed to an area of
conflict?’ – a huge difference!




                                        Home Buying / Mortgage Guide                                            21
breakdown of the costs
involved in the mortgage process
I am only going to touch briefly on the types of cover generally recommended for a mortgage – for more
in-depth information please contact us for the free Insurance Fact-sheet on 0845 612 3336 or visit the
Feedback section at www.mortgages4forces.co.uk. You can also e-mail us at frank@nbhm.com.
Solicitor
The Fact-sheet covers things like – how much cover you should have...PPI (cover you don’t need – and
shouldn’t be paying for)...Factors that affect the cost of cover...existing cover...Buildings/Contents cover etc.
          Land Registry - £150.00 plus vat = £176.25 (registers ownership and mortgage)

          Land Registry Search - £10.00
breakdown of the costs
    Stamp Duty – see scale of S. Duty charges earlier in Guide.
involved in the mortgage process
          Local Search - £140.00

Solicitor
        Environmental Search - £49.00 –client receives a copy.
•	   Land Registry - £150.00 (Fee payable is variable and depends on value of property)
•	          Registry Search - £10.00 Bankruptcy Search - £1.00 per name
     Land Drainage Search - £49.50
•	   Stamp Duty – see scale of S. Duty charges earlier in Guide.
•	          Search - £140.00 (not required if HIP pack available)
     LocalMining Search - £25.00 – only certain areas.
•	   Environmental Search - £49.00 –client receives a copy.
•	         Planned Search - (not required if HIP planning applications – particularly relevant on
     Drainage Search - £49.50 £30.00 – looks atpack available)
•	         newer properties only certain areas.
     Mining Search - £25.00 –on new estates.
•	   Planned Search - £30.00 – looks at planning applications – particularly relevant on newer properties
     on new estates.
           Bank transfer fees – CHAPS - £30.00 plus vat – for transferring money from your
•	          transfer to – CHAPS - £30.00
     Bank solicitorfeesselling solicitor. plus vat – for transferring money from your solicitor to
     selling solicitor.
•	         Solicitors £395.00 plus vat. Extra £50.00 plus vat for plus vat if LSAP is used.
     Solicitors Fees - Fees - £395.00 plus vat. Extra £25.00 handling theLSAP formalities.


       Note – Most of the fees stated above will be fixed fees – whichever solicitor you use.
       The Solicitors Fees quoted are those charged by the solicitors that
       Mortgages4Forces™ provide for personnel.


Surveyors scale of fees.
Surveyors scale of fees. for scale of fees.
Contact Mortgages4Forces™
Contact Mortgages4Forces™ for scale of fees.

Mortgage Advisers Fees
These can vary widely. Some advisers may not charge a fee – but will probably not provide a home-buying
                                   Home and still not provide a home-buying ‘package’! Some advisers will
‘package’. Some advisers will charge a fee Buying / Mortgage Guide
22
charge a percentage of the purchase price of the property – anywhere from 0.5% to 2%...or more - be careful
of these charges – they can be expensive, especially if anything over 0.5% is being charged. The fees I think
you can be comfortable with are stated cash amounts - between £250 - £500 (maximum). You should ask the
adviser what fees he charges, what service (a ‘package’?) he provides for this fee, get the fees in writing – at
the outset.

Important: Whatever fees an adviser quotes – you must get, in writing, confirmation that the fee
is only chargeable when 1. you find your property and 2. you receive your formal offer of mortgage.
If for any reason the mortgage does not go ahead – you want written confirmation that there will be
no charge.




                                        Home Buying / Mortgage Guide                                            22
Lenders Charges
Mortgage Indemnity Guarantee Premium (MIG). A fee charged by some lenders on anything borrowed
over 90/95% (it varies from lender to lender). It is absolutely imperative that you avoid the MIG – unless
absolutely unavoidable. It protects the lender – not you. (see ‘Avoiding the Pitfalls’ further on).

Most lenders will charge a booking or arrangement fee for any ‘deal’ (a fixed/capped/discount/cashback
etc) that they are offering. This varies from lender to lender. The Arrangement Fees these days can be quite
hefty – depending on the mortgage deal you have opted for…and the deposit you have available.



government first-time buyers
initiatives & key-worker schemes
The Government have put together a number of schemes/initiatives aimed at helping people, mainly first-
time buyers, get on the housing ladder. The aim is to help by either lending them equity to put down towards
purchase or by allowing them to part-buy and part-rent. Here are some basic details and contacts for more
information...or contact us to find out if you are eligible and what you might expect - and we’ll do all the
checking for you.

England
There are two main Government backed schemes in England – Keyworker Living Scheme and HomeBuy.
These schemes are open to a number of what the government deem to be ‘Key-Workers’ – including MOD
employees – Service personnel.

Key-Worker Living Scheme (KWLS) is available in and around London, South-East and East England. It
comprises three different options:
Intermediate rent – where you can rent a new-build property for around 70/80% of the current market rental.
Newbuild Homebuy – A form of Shared-Ownership (see earlier section in this guide), where you buy a
percentage of the property and pay rent on the balance – aiming at eventually buying up the share that you
do not currently own.
Open Market Homebuy – You are given an ‘equity loan’ – so you do not pay rent on any portion of the
property. You can choose a property on the open-market and, if eligible for the scheme, you will receive a
loan to help purchase it. The loan to be repaid on the sale of the property when, hopefully, the value of the
property has increased.

HomeBuy Scheme is available throughout many regions of England. It is similar to the KWLS – apart
from not offering the Intermediate rent scheme. It does offer the Newbuild Homebuy and the Open Market
Homebuy...and also a First Time Buyer Initiative that is very similar to Shared ownership.

For more information on Keyworker Living Scheme or HomeBuy contact – www.communities.gov.
uk/housing/buyingselling/ownershipschemes/homebuy/keyworkerliving or phone – 0207 944 4400 or
contact Mortgages4Forces™.

Scotland
The Scottish Executive launched an initiative a few years ago to help mainly first time buyers – though not
exclusively FTB’s – to get onto the housing ladder, this initiative was called HomeStake - this covers New
Supply Shared Equity – for more information on HomeStake contact – Link Homes – 0845 155 0019.
There is also a relatively new initiative called Low-cost Initiative for First-Time Buyers – LIFT. The scheme
is a Shared Equity scheme; this means that the Scottish Government enables people to buy a home in
partnership with a registered social landlord. The buyer generally pays between 60-80% of the purchase price
of the property – with the remainder held by a registered social landlord (usually a Housing Association) using
a Government grant. LIFT is an Open-Market initiative.


                                       Home Buying / Mortgage Guide                                            23
The New Supply Shared Equity scheme and the Open Market Shared Equity Pilot scheme aim to help people
on low incomes who wish to own their own home but who cannot afford to pay the full price for a house. The
shared-equity schemes mainly aim to help first time-buyers. The schemes can, however help others too. For
example, they may be able to help those who are looking for a new home after a significant change in their
household circumstances.

For more information on these schemes...and many more Scottish housing options...go to –
www.communitiesscotland.gov.uk – under the heading ‘Popular pages’ click on LIFT and then for more
information on the schemes – and where they are available – click on New Supply Shared Equity scheme
or Open Market Shared Equity Pilot scheme. Or call – 0131 313 0044 ...or visit www.mortgages4forces.
co.uk or call 0845 612 3336 – and we’ll check your eligibility and get you full details of what might be
available to you.

Wales
Wales currently have no Key-Worker or First-Time Buyer Initiatives, along the lines of Scotland and England,
that is to say, they are not Government backed. I am told by the relevant department in the Welsh Assembly
that people who want information on similar schemes to those available in England and Scotland should
contact the local councils in which they want to live.

For more information on this topic in Wales – contact – 01685 729153.



avoiding the pitfalls!
If you have followed the advice so far given in this guide you will avoid all the pitfalls commonly encountered
by many people – especially first-time buyers.

Taking on too much – do your homework – before proceeding, work out what will be comfortable affordable
with a new mortgage – and stick to those limits. Your adviser will help ensure that you do. Remember –
everything must not just be affordable – but must be comfortably so.

Avoiding a Mortgage Indemnity Guaranteed Premium (MIG)
Mentioned a number of times (sometimes prefaced by ‘dreaded’! - it is so important that you are aware of
the adverts for lenders) is a Higher fee) that I Charge. Many lenders it throughout this Guide. It’s
TV cost of this, some would say, unjust, Lendinghave included references tocharge a MIG on higher
more common name these days (certainly deem to be current TV adverts for lenders) is a of a high
LTV’s (see pages 10-11), which they in a number ofriskier lending. Where, becauseHigher Lending
Charge. Many little or no equity left in a property, should you default on the mortgage and
LTV, there is lenders charge a MIG on higher LTV’s (see pages 10-11), which they deem to be riskierthe
lending. Where, reprocess high LTV, there is little or no back what they have loaned and so on the
lender have tobecause of ait, the lender may not getequity left in a property, should you defaultbe ‘out
mortgage and the lender pays the MIG to a specialist insurer who promises to make up and
of pocket’. The lender have to reprocess it, the lender may not get back what they have loanedany so be
‘out of pocket’. The lender pays the MIG to a specialist The who promises to make protects the
shortfall should repossession have to take place.insurerMIG – that you pay – up any shortfall should
repossession you! The added The is that the insurer, having been paid the MIG, can also
lender…not have to take place.twistMIG – that you pay – protects the lender...not you! The added twist is
come after you to redeem the shortfall…not exactly fair, is it?
that the insurer, having bcome after you to redeem the shortfall...not exactly fair, is it?


      Thought: There are lenders ‘out there’ who will offer similar deals to those charging
      a MIG (Higher Lending Charge) but won’t charge the MIG. A good adviser will always
      aim to have you avoid paying this charge.


Power of Attorney (PoA)
Power of Attorney (PoA)
If you know that you or a partner, involved in the home-buying/mortgage likely to be likely to
If you know that you or a partner, involved in the home-buying/mortgage process, isprocess, isaway during
that process – exercise/deployment etc – make sure your adviser make sure your adviser knows so
be away during that process – exercise/deployment etc – knows so that he can see that PoA is
that he can see that PoA usually the acting solicitor – can act on the missing partners behalf – can act
arranged, when somebody – is arranged, when somebody – usually the acting solicitor – signing
relevant documents etc. This can really speed relevant documents etc. This can really signature to far-
on the missing partners behalf – signing things up – not having to send documents for speed things
flung not having to send documents for signature to far-flung places.
up – places.

Long Service Advance on Pay (LSAP)
                                   Home Buying / Mortgage Guide                                               24
You can get advice on LSAP from JSHAO (Civ. 01722 436-947. Mil. (9) 4331 947), your
Welfare Office or Pay Office. If you are planning to use this – and if funds are required by a
Long Service Advance on Pay (LSAP)
You can get advice on LSAP from JSHAO (www.mod.uk/jshao - for full contact details), your Welfare
Office or Pay Office. If you are planning to use this – and if funds are required by a certain deadline – to
allow contracts to be exchanged, to complete the transaction by a certain date (maybe a discount from a
builder) etc – you should get your application form in in plenty of time. Remember – before submitting your
application for LSAP – you will have to list your solicitor’s details, the recommended lender, the amount you
are buying for and how much LSAP you want to apply for (up to £8,500). Another important thing to bear in
mind is that applying for LSAP requires you to be ‘signed off’ by a Medical Officer.

Important: From experience, I have seen that recent (past six months or so) LSAP applications
seem to be taking longer to process by JPAC – probably due to more personnel applying for it – so
allow plenty of time – especially if you have a deadline to meet.

BFPO Addresses
Dealt with on page 11



your mortgage
There is more to a good mortgage deal than just the rate that the lender is offering. Many Service personnel
will be due to receive their gratuities during whichever ‘deal’ they have opted for. Many will want to use some
of this lump sum to reduce the mortgage – it makes sense! Therefore, any deal that you accept (a 2/3/5/10
year fixed rate, for example) must offer the flexibility to allow you to pay – penalty free – whatever you wish
off the outstanding capital, whether in a lump sum or increased monthly payments – at any time during the
‘deal’ period.

Once your ‘deal’ ends, you must not be ‘tied’ (known as ‘extended tie-ins’) to the lender in any way, but
must be free to ‘shop-around’ (or have your adviser do it for you) for a better deal. Always try to ensure that
your mortgage term (25/30/35 yrs etc) doesn’t take you past your chosen retirement age, unless you feel that
you will be in a good position at that time to manage payments.

A good adviser will have taken all of the above into account for you.




summary
Firstly, we hope you have found this Guide easy to follow. In compiling it I have taken advice from a good
number of ‘ordinary’ people – that is to say, people with no knowledge of the mortgage or home-buying
business – both civilian and military. They have helped me lay the Guide out in a way that they could easily
follow and I am grateful for their input. Secondly, if you have followed the advice given in the Guide, you can
be fairly confident that you have secured the best, and most suitable, mortgage deal and kept your costs to a
minimum.

Apart from the discounts/’extras’ we have secured for Forces personnel – up to 20% discount on all surveys
throughout Britain and free wills for you and your partner – by giving you breakdowns of all the expected fees
you will have a very good idea of what to budget for – before committing to a mortgage.

We would appreciate your feedback on the contents of the Guide as it will help us to refine and possibly to
improve it. You can leave feedback – or any comments/queries at www.mortgages4forces.co.uk feedback
section or by calling 0845 612 3336. You can also e-mail us at frank@nbhm.com



                                       Home Buying / Mortgage Guide                                          25
ongoing help and advice
We have a very comprehensive website which compliments this Guide. At www.mortgages4forces.co.uk
you will find a site which offers a number of very valuable features for those planning to enter the home-
buying/mortgage world. The site contains a number of calculators – affordability, amount you may be able to
borrow, cost for whatever you borrow. There is also a monthly Newsletter Forces-Mortgage – which you can
register for, completely free of charge. Packed with the latest information on the home-buying/mortgage front.
Special offers from builders, samples of current mortgage deals, rate forecasts and confirmation of changes
to current rates, tips and advice...and lots more. We’ll email you the Newsletter monthly.

The Feedback section on the site allows you to tell us what you’d like to see covered on the site or in the
Newsletter. You can leave comments or tips for your colleagues on any experiences you may have had whilst
buying/selling...good and bad – it may just help somebody else! Your ideas on how we could improve the
Guide or the website. In fact, anything relevant to providing HM Forces personnel with the best possible
home-buying/mortgage experience. Maybe you would like us to visit your base to provide a presentation on
any aspects of the home-buying/mortgage process.

If you still have any questions not answered in this guide, please contact us on 0845 612 3336.

For any service personnel outside of the UK who want to contact us please call 0044 (0) 0131 467 0996 or
visit our website at www.mortgages4forces.co.uk or e-mail frank@nbhm.com



workshops and seminars
We have put together a number of Workshops and Seminars based on this Guide and which we are happy
to provide for all HM Forces personnel and their families – wherever you are based. The Workshop takes you
through all the stages of the home-buying/mortgage process – showing you the actual documents you’ll be
dealing with, explaining how lenders arrive at the amounts they are willing to lend, checking affordability –
whilst with you, how to get free background survey information, – even getting you an Agreement-in-Principle
if required, to confirm how much you can borrow and that a mortgage is readily available, answering any
questions you may have – on any aspects of the mortgage/home-buying process. For more information
simply contact us on: 0845 612 3336 or www.mortgages4forces.co.uk or e-mail frank@nbhm.com



glossary
Accident, Sickness and Unemployment Insurance (ASU)
See Mortgage Payment Protection Insurance (MPPI). This insurance is designed to cover the borrower’s
mortgage payments in case of accident, sickness or unemployment. It is normally for a limited period only.

adverse credit
The term used if the borrower has suffered a poor credit history. This could include past mortgage or loan
arrears, County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs) or bankruptcy. Other terms
used to describe an adverse credit mortgage are non-status, credit impaired, bad credit, poor credit, no
credit check and low credit score.

Annual Percentage Rate (APR)
An interest rate reflecting the cost of a mortgage shown as a yearly rate. This rate is likely to be higher than
the advertised rate on the mortgage, because it takes into account all the credit costs. The APR allows
homebuyers to compare a variety of types of mortgages based on the annual cost for each loan.


                                        Home Buying / Mortgage Guide                                               26
apportionment
Dividing the liability for property tax, water charges, etc. between the seller and buyer of a property.

arrangement fee
A fee charged by most lenders in return -[or providing you with a particular mortgage deal. It is usually
charged on completion (sometimes on application) of the mortgage (and some lenders allow you to add it to
the mortgage). Usually it is charged for a fixed, discounted, tracker or cashback mortgage.

assignment
A document which transfers rights of ownership from one person to another, such as an endowment policy to
the bank/building society in connection with a mortgage. Can also be the document transferring the lease on
a property.

Base Rate tracker
A fairly new type of mortgage. The interest rate is variable but set above the Bank of England (BoE) Base Rate
for a period (sometimes the life of) the mortgage - a few years, say. It ‘tracks’ the BoE rate.

booking fee
Similar to the arrangement fee. Sometimes charged as well as the arrangement fee. Usually charged for a
particular deal- capped/discount/fixed, etc. It is sometimes non-refundable should the mortgage not proceed.
Generally, it may be added to the loan.

broker’s fee
A fee charged by a mortgage adviser/intermediary for finding the most appropriate mortgage for the borrower.

building society
A mutual organisation (no shareholders) lending money to people to buy or remortgage residential properties.
Most of this money comes from the savings of individual members of the society who are then paid interest
on their savings.

buy-to-Iet
A mortgage designed for people who wish to buy a property to rent out to others. The lender normally bases
the lending decision on projected rental income rather than the borrower’s income.

capital and interest
Also known as a Repayment Mortgage. The monthly mortgage payments made to the lender are partly to
repay the interest and partly to repay the capital and ongoing costs involved in a mortgage.

capped rate
The interest rate charged on a mortgage where there is a guarantee from the lender that the rate cannot
rise above a certain amount, usually for a set period, say two to five years, but which will reduce should the
Standard Variable Rate reduce below the capped rate.

cashback
An amount the lender promises to pay you when you take out a mortgage. Sometimes it is a percentage of
the mortgage.

charge
Any right or interest (i.e. any clause recognised and protected by the law), especially a mortgage, to which a
freehold or leasehold property may be held.

charge certificate
A certificate issued by HM Land Registry to the mortgagee of a property that has a registered title. It
contains three parts: charges register, property register and proprietorship register. It contains details of any


                                         Home Buying / Mortgage Guide                                               27
mortgages, restrictions or other interests. Where there is no mortgage it is called the Land Certificate and is
issued to the registered proprietor.

chattels
Any moveable items such as furniture or personal possessions.

chief rent
A rent payable by the owner of a freehold property similar to the ground rent payable by a leaseholder. This
rent is normally only found in Northern England and can be bought out by a freeholder.

completion
When the sale and purchase of the property are finalised and you become the owner of your new property.

contract
Legally-binding agreement for sale. It comes in two identical parts - one signed by the seller and one signed
by the purchaser. Once the two parts are exchanged (you may hear the phrase ‘exchange of contracts’), both
parties are committed to the transaction.

conveyancing
The legal process involved in buying and selling property.

County Court Judgement (CCJ)
A decision reached in the County Court which is usually for not paying a debt. This will show up on your
credit files and, if cleared, a note will be placed on the file confirming this. This can dramatically affect your
ability to get a mortgage, certainly at normal rates.

covenant
A promise which is contained in a deed.

credit scoring
The way in which a lender assesses whether you are a good risk to offer a mortgage to. It involves more that
just your credit rating.

credit search
A search a lender makes with a specialist company (Experian and Equifax are two leading companies) to
check your credit record, looking for unpaid debts, County Court Judgments (CCJs), defaults, bankruptcy,
etc.

debt consolidation
A way of paying normally high-interest debts (such as personal loans and credit cards) by having them
incorporated into a new mortgage, to benefit from lower interest rates (though over a longer period) and to
reduce monthly payments.

deed
A legal document which is ‘signed, sealed and delivered’ and not just signed. The title to both freehold and
leasehold property can only be transferred by deed.

deposit
The amount of money you put towards buying your property.

disbursements
A solicitor’s expenses; for example, searches, faxes, Land Registry fees, etc. You usually get a list of these in
your final solicitor’s bill.



                                          Home Buying / Mortgage Guide                                               28
discount rate
A lending rate which is set below the lender’s variable rate, usually for a period between one to five years.

Early Redemption Charge (ERC)
A charge made by a lender if you payoff part or all of your mortgage before an agreed date, or you switch
your mortgage to another lender during the ERC period. This charge is normally only applied for fixed/
discount/capped, etc. deals.

endowment
A life assurance policy that has been designed to aim at producing a lump sum to payoff an Interest Only
Mortgage. There are different types of endowments.

equity
The amount of value in a property that is not covered by a mortgage. You simply deduct the amount of
outstanding mortgage from the value of the property to find the equity.

equity release
Taking a new, larger mortgage, either with your existing lender or a new (better one) or increase your existing
mortgage to release cash for things such as home improvements, debt consolidation, holidays, etc.

exchange of contracts
The point at which you and the person selling the property sign and swap identical contracts that show
the agreed price, what fixtures and fittings are included, as well as the date by which everything is to be
completed. Once these contracts are signed everything becomes legally binding and if you or the seller try to
pull out before completion, there will be a case for compensation.

fixed rate
The interest charged for a particular mortgage which is set for an agreed term, say one to five years.

fixtures
Any item that is attached to a property and so is legally part of the property.

flexible mortgage
Quite a new type of mortgage. It has an advantage in that the interest rate is variable but is calculated daily,
instead of monthly or annually. This means that any capital repayment of the loan will affect the interest
charged on the balance immediately! By making overpayments, the interest saved on the mortgage over the
term can be significant. The lender normally allows ‘payment holidays’ to be taken.

freehold
This is where you own both the property and the land that it is on.

gazumping
When a seller, who has already accepted one buyer’s offer, then goes on to accept a higher offer from
somebody else, pushing the first buyer out of the transaction.

ground rent
A fee that a leaseholder has to pay to the freeholder every year.

guarantor
A person who agrees to be liable for the repayment of a mortgage if a borrowed fails to maintain his mortgage
payments. This is normally a parent or close family relative.




                                        Home Buying / Mortgage Guide                                            29
Homebuyer’s Report
A property survey that is somewhere in between a mortgage valuation and a full survey. It is a very in-depth
report (usually many pages) that gives the buyer more peace of mind about the property he is about to
purchase.

income multiples
The amount that the lender normally multiplies your income by before deciding how much it is willing to lend.
The average lending multipliers are 3.5 times the main earnings plus once times the secondary earnings. This
does vary quite a bit from lender to lender.

Interest Only Mortgage
The borrower pays only interest on the amount of mortgage he borrows (keeping monthly repayments lower).
He is, however, never reducing the amount borrowed (as with a Repayment Mortgage) and he must ensure
that enough funds will exist (possibly through an investment ‘policy or ether means) to repay the mortgage at
the end of the term.

Land Registry fee
This is the fee paid to the Land Registry to register ownership of an area of land.

leasehold
If you buy a leasehold property, you own the property for a set number of years but not the land on which it is
built, unlike freehold where you own both the property and the land indefinitely.

Loan to Value (LTV)
This means the size of the mortgage as a percentage of the value of the property; for example, a £90,000
mortgage on a property valued at £100,000 would mean a LTV of90 per cent.

local authority search
A check carried out by the buyer’s solicitor to make sure that there are no proposed developments in the
area of the property, such as roads, railways or other developments. The check also includes details of the
planning permission for the property and whether the local council has served any enforcement notices on the
property. A fee is payable for this service.

mortgage
A loan to buy a property where you put up the property as security against you paying back the loan.

Mortgage Indemnity Guarantee (MIG)
Avoid where possible! This is insurance that covers the lender in the event that your property is repossessed
and the lender cannot get its money back. Although this insurance covers the lender (not you!), you have
to pay for it. Some lenders will allow the MIG to be added to the mortgage at completion, whilst others will
deduct the MIG from the mortgage amount at completion.

Mortgage Payment Protection Insurance (MPPI)
See Accident, Sickness and Unemployment Insurance (ASU). It is practically the same as an ASU.

mortgagee
The company or organisation that lends you the money.

mortgagor
The person taking the mortgage out.

negative equity
Where the money owed by the mortgagor is greater than the value of the property.



                                        Home Buying / Mortgage Guide                                         30
non-status
Where a lender may not require income details from you or may accept some past poor credit history.

overpayment
Where you pay extra, over and above what you have agreed to repay monthly, to clear the mortgage more
quickly and, therefore, to reduce the amount of interest you are paying.

payment holiday
A period where the mortgagor makes no mortgage payments (maybe a financially ‘tough’ period in your
life). Normally only available to those with a flexible mortgage, who have previously overpaid their monthly
repayments.

portability
The term used to describe a mortgage that can be transferred (‘ported’) to a new property should you
move house.

redemption
The process of repaying your mortgage when you are either moving house, remortgaging or at the end of the
mortgage term.

redemption penalties
Penalties charged by a lender when a borrower pays off the mortgage before the end of the agreed
redemption period. Usually charged where you have had a fixed/capped/cashback/tracker deal. These are
the same as Early Redemption Charges (ERC)

remortgage
The process of repaying one mortgage with the proceeds of a new mortgage, using the same property
as security.

repayment
Another name for a Capital and Interest Mortgage. The monthly mortgage payments are used partly to repay
the amount borrowed (capital) and partly to repay the interest on the outstanding mortgage.

repossession
The legal process by which a borrower is deprived of his interest in the mortgaged property, usually involving
the forced sale of the property (maybe for less than the mortgagor owes the lender) at public auction, with the
sale proceeds going towards the mortgage debt.

right to buy
A council house tenant may apply to the council to buy the property at a discount, dependant on the length
of his tenancy.

RPI
An inflationary indicator that measures the change in the cost of a fixed basket of retail goods.

sealing fee
A charge made by lenders when you repay a mortgage.

searches
Checks carried out by your solicitor during the conveyancing process. These checks are made with local
authorities and other official organisations to check planning proposals and any other matters that may affect
the value of the property and its future saleability, before the lender offers the mortgage.




                                        Home Buying / Mortgage Guide                                           31
self-certified
Normally for borrowers who may find it difficult to provide proof of earnings. Maybe because they have a
number of sources of income or have recently started up in business. The lender will not request proof of
earnings but will ask the borrower to sign a declaration which states his income, sources and amounts. Self
certified mortgages normally offer higher interest rates and a more limited choice of lenders and products.

shared equity
A scheme operated by a property developer where he retains a percentage equity of around ten per cent in
the property. The developer then holds a second charge over the property. The ten per cent may be interest
free or may incur interest and be added to the total amount owing on the property.

shared ownership
A scheme operated by housing associations where a person owns part of the property, say 50 per cent, and
pays a mortgage on this, while the housing association owns the rest of the property and the person pays
rent on this share.

Stamp Duty
A government tax payable on the purchase of a property by the purchaser.

Standard Variable Rate (SVR)
The interest rate that the lender charges. As the rate goes up and down your monthly mortgage repayments
are adjusted accordingly.

structural survey
A very wide-ranging check of a property, inside and out. It is very thorough and should pick up all but the
most well-hidden faults. It is a fairly costly survey.

term
The period of years over which you take the mortgage (and any life insurances) and when you have to repay it.

Term Assurance (Mortgage Protection Cover)
An insurance policy designed to repay the mortgage on death (or diagnosis of a wide range of conditions
specified by the insurer, if the Critical Illness Cover (CIC) option is taken). The cover may also payout early on
diagnosis of a terminal illness (not the same as CIC).

tie-in period
The period for which you are ‘tied’ to a lender, usually as a condition of a special mortgage deal. This ‘tie-in’
may be for months or years and if you move your mortgage elsewhere during this period, you may be liable
for a redemption penalty.

title deeds
Documents that provide proof of who owns the freehold and leasehold properties.
transfer deed
A document that, once you have signed it, transfers the ownership of the property to you.

unencumbered
Where a property is owned outright and has no loans or mortgages secured against it.

valuation
Sometimes known as a ‘scheme one’ survey, or ‘basic valuation’. A fairly simple check of the property (usually
for the lender’s benefit, rather than the purchaser’s) to find out how much it is worth and whether it is suitable
to provide a mortgage for.




                                         Home Buying / Mortgage Guide                                           32
valuation fee
The fee paid either directly to the surveyor (if you are organising your own survey) or paid to the lender in
order for it to instruct a survey to ensure that the property is mortgageable.

variable rate
The interest rate charged by a lender. It goes up and down when the Bank of England rate changes and, as a
result, your monthly repayments change accordingly.

vendor
The person selling the property.




Your home is at risk if you do not keep up with repayments on a mortgage or other loan secured on it.


                                        Home Buying / Mortgage Guide                                            33
       Always aiming to get the best for YOU!

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                                Craighall Road
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                             Tel: 0845 612 3336
                           Email: frank@nbhm.com

                     www.mortgages4forces.co.uk




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