Mortgages & Lending
Q: – When is the earliest I should start reviewing my re-mortgage options?
A: We recommend that you start considering your re-mortgage options, at least six months before your current rate is due to expire which gives us enough time to research the best options for you and apply accordingly. It also allows the Solicitor sufficient time to complete the transaction and legal works of the re-mortgage process.
Q: – I am looking to purchase a new property. However, my current income is not sufficient to obtain the mortgage amount that I require. My parents are willing to add their names to my application to help me achieve more of a mortgage. They are concerned that they may be liable for additional Taxes as they already own properties. Can my parents assist me with the new mortgage without being liable for paying additional property Stamp Duty Land Tax for this property?
A: In this instance, we could use a lender that allows an application on a Joint Borrower, Sole Proprietor basis. This option allows more than one borrower on the mortgage; every borrower’s income can potentially be used to achieve a larger mortgage.
One person can own the property, and as the legal owner, they retain ownership and taxes such as Stamp Duty, Capital Gains and Income will apply for the legal owner. The tax rules for a married couple buying a property on a Joint Borrower, Sole Proprietor basis may differ. In cases like this, we would highly recommend that all parties seek independent legal & tax advice before entering into an arrangement of this nature.
Q: – What is the difference between a fixed rate mortgage and a tracker mortgage?
A: A fixed mortgage is fixed for a certain period of time, e.g. 2, 3 or 5 or even up to 10 years. This means the interest rate and monthly payments will not change.
A tracker mortgage normally tracks the bank of England base rate, so it the bank of England increase or decrease the base rate than the monthly payments would also change. These types of product are also available for a set period of time, e.g. 2, 3 and 5 years.
Q: – I am a residential homeowner, and I am looking to purchase my first Buy to Let property. How much deposit would I need to put down?
A: Most lenders traditionally require a minimum deposit of 25% for a Buy to Let property purchase. There are a handful of lenders that can consider Buy to Let purchases with 15% & 20% deposits as well. However, the rates of interest for these lenders tend to be considerably higher.
Q: – I have savings in my bank accounts that are currently earning very little interest. I could use these to overpay and reduce my mortgage balance; however, at the same time, I would like to have access to these funds for a rainy day.
Is there any way I can use my savings to help with my mortgage, whilst retaining instant access to these funds should the need arise?
A: With an offset mortgage, your savings can be used to offset the interest that you pay on your mortgage helping you to either reduce the mortgage term or your monthly mortgage payment whichever suits you best. Your savings are put into an offset savings account that is linked to your offset mortgage to reduce the amount of mortgage interest you are charged.
A simple example would be:
£100,000 Mortgage Balance
£20,000 Savings
Mortgage interest would only be charged on £80,000, which is the difference between your savings and the mortgage amount outstanding.
Q: – Can I add or remove my husband or wife to my residential mortgage?
A: Yes- this process is called a transfer of equity and can be completed whilst you are within your fixed period with your existing lender, or at the point of re-mortgage.
In both cases, the existing or new lender will fully underwrite the application accordingly.
There will also be additional legal work to be carried out to change the deeds, which will be chargeable. Your Solicitor can also confirm if there is a stamp duty liability. You should always take legal advise when considering a transfer of equity.
Q: – Can more than two people apply for a mortgage?
A: Yes, we have access to lenders that will consider the income to be used for up to 4 applicants to support a mortgage application.
Q: – What is the maximum available mortgage term for a Buy to Let Mortgage?
A: Traditionally the maximum mortgage term has been 25 years, however depending on age at application, there are some lenders that will now consider up to a 40 Year Buy to Let Mortgage Term.
Q: – Why do the lenders offer so many different rates?
A: Many lenders base their rates on loan to value brackets (LTV). Therefore the more equity you have in your property versus the amount of mortgage outstanding, the lower the interest rate you will be offered. Choosing a lender and mortgage product can be a daunting task; give our advisors a call today to discuss your exact lending requirement.
Q: – As a first-time buyer, can I buy an investment property and pay the lower stamp duty?
A: First-time buyers can buy their first property as an investment property, but they will not be eligible for the lower stamp duty. It is advisable to consult a property solicitor or conveyancer to obtain advice around this.
Q: – I am self employed, does that mean I have to pay a higher interest rate to get a mortgage?
A: No, not necessarily. Depending on your circumstances and requirements, we have access to High Street lenders that offer the lowest rates, which you could have access to being self employed. We also understand complexities in the income of some of our self employed clients, and our advisors can ensure that you are able to achieve the best possible rate based on all of your income streams and individual affordability. Give one of our advisors a call today to discuss further.
Q: – What is a multi-unit property?
A: A multi-unit property is typically (but not always) one building that has been split into 2 or more units and it is all on one freehold title. In some situations, you can have a small cluster of terraced houses on a single freehold title.
Q: – How much can you borrow for buy to let mortgages?
A: The maximum amount that you can borrow depends on the expected rental income for that property. Lenders will typically need the rental income to be at least 125% of the monthly mortgage payments and this can even go up to 145% of monthly mortgage payments depending on lenders criteria.
Q: – Can I buy a property to let out if I do not own a residential property?
A: – Yes- we have lenders that will consider lending to individuals in this situation.
This is known as a First Time Buyer – Buy to Let mortgage. As lenders have different lending criteria, you would benefit speaking to one of our experienced Mortgage Advisors. They will be able to review your requirements and circumstances to assist your with obtaining a mortgage for your first investment property.
Q: – What is a re-mortgage?
A: – re-mortgage is when you change mortgage lender without actually moving home. This is normally done by paying off the existing mortgage with the funds from the new mortgage and this is secured against the same property.
Q: – Why should I re-mortgage?
A: – People tend to re-mortgage there home for several reasons. Some of the most common reasons tend to be:
- Your current mortgage product or deal is coming to an end and hence to avoid going on the lenders standard variable rate, you may look to re-mortgage and secure a new rate for another fixed term.
- You need to reduce your monthly mortgage payments (you have already be on your lenders standard variable rate and re-mortgaging will allow you to secure a potentially cheaper deal)
- You need to borrow more money for things like home improvements, paying off some existing unsecured debts or buying another property.
Q: – What questions should I ask my mortgage broker?
A: – The questions you would ask your mortgage broker depend entirely on your situation and circumstances.
The main question you may have, is how much can I borrow or how much deposit will I need?
It is always advisable to have a conversation with one of our brokers/advisers, before you find a property. This would ensure that you are looking at properties within your affordability. We have seen many instances, where clients have found their dream home, only for it to be too far out of their affordability.
Protection & Insurance
Q: – Which type of protection policy is suitable for a repayment mortgage?
A: Decreasing Term Assurance is commonly used to protect a capital and interest payment mortgage, where the outstanding balance reduces every year. It offers the least expensive life cover available since cover decreases annually on a fixed scale. Premiums remain constant throughout the term of the policy.
Q: – What is Life Insurance For?
A: – Bought a new home – this payout could allow your family to pay a mortgage after your death.
Having children – this payout can provide them whilst growing up if they could no longer rely on your income.
Leave a legacy – this can provide your surviving relatives with an inheritance when you die.
Funeral Costs – this could provide your family with lump sum to assist with the funeral costs.
Q: – What covers can I take out to protect my children?
A: Depends on the age of the child, if under 18 or even in some cases under 23, the parent can take out Critical Illness cover in their name. Most insurers will pay a sum of £25,000 (subject to policy limits) in the event the child contracts a Critical Illness that meets with their policy definition. Young adults over the age of 18 can have policies in their name to provide cover to age 70 if they wish to and for more considerable sum assured.
In the unfortunate event that a child is unwell to a stage that a parent needs to stop working to take time off to care for them, then most Income Protection providers offer Carers Benefit. Whereby the Parent can make a claim in their plan and either the monthly benefit, they are insured for, or a set benefit as defined by the insurer is payable for 12 months.
Q: – Can I get Life Insurance if I suffer from mental illness?
A: Yes, you can, and this depends on your current state of mind condition, how and what caused your health issues, the medication you are on and your current symptoms.
At Key Life, we have helped to arrange Life Cover with affordable premiums for people with mental health issues such as; Stress, Depression, Post Traumatic Stress Disorder, Anxiety, Panic attacks, Post-natal depression, Bi polar Disorder & Schizophrenia, to name a few.
Q: – Does an Income Protection plan cover loss of employment or redundancy?
A: An Income Protection plan is your safety net in the event of you being unable to work through illness or injury and unfortunately it will not cover any earnings lost due to loss of employment or redundancy.
If you would like us to review your existing Income Protection plan or would like to find out more about whether this type of plan would be suited to you, please contact us for an initial chat. It is important to review any existing plans on an annual basis in case of any changes in your circumstances.
Q: – Can I have two income protection policies in place at the same time?
A: Yes, you can, but there are restrictions on the amount you can claim on your salary so you can’t exceed the maximum amount.
You need to be able to justify why you need to have more than one policy. An example could be that an existing cover may not provide everything you require later so you may decide to take out additional cover so that you have the cover you would meet your current requirements.
Income Protection is an Advised product, and our advisors will be able to go through your existing policy and let you know what is best suited to you and your financial needs.
Please remember that everyone’s situations change and as with everything in life, it’s important that you review any existing covers regularly.
Q: – Why should I review my existing Income Protection policy?
A: Below are some of the reasons why you may need a review:
- Have you had a salary increase/decrease? Will your income protection plan pay enough monthly benefit to you?
- Have you moved in your employment or switched roles within your current employment which may have resulted in changes to your salary?
- Have your work benefits been modified? Maybe your employer has enhanced their staff benefits which means you no longer require it or you may need to increase/decrease the level of cover?
- If your policy was taken out for mortgage purposes, do you need to adjust the cover?
- Do you still want to retire at the age you wanted to when you took out the policy?
As with anything you pay for in life, make sure that you review your policy regularly so that you have peace of mind should you ever need it.
Q: – Why do insurers request further medical information from the GP when I’ve completed the medical details required on the application?
A: If the medical underwriters feel that they need to find out more about the applicant or a condition disclosed, they may request further information from the applicants GP.
This could be a targeted report about a particular condition, or it could be a full medical report with all of your history.
During the research process, we may get an indication from individual insurers on what they may potentially require (medical screening or a medical report, etc.).
Before we start any work on your policies we always request full medical information from you, which would include readings (E.g.diabetes, blood pressure and cholesterol) and the date the last test was taken if there are medical conditions. Based on the information provided, one of our Advisors will let you know if the underwriters are likely to request a medical report.
Sometimes insurers request medical reports purely based on a large amount of cover applied for even if you do not have any medical conditions.
Q: – What is a decreasing term life insurance policy?
A: This is a policy which pays out over a certain period of time and is usually taken out to cover your repayment mortgage.
The monthly premium stays fixed throughout the term of the policy but the amount paid out decreases as your mortgage payments decrease.
If you have jointly purchased your home with a partner and one of you die, you do not want to leave that debt to the living spouse. A joint mortgage would be calculated on the basis of two people’s income, can the surviving person continue to pay the full mortgage on their own? What would happen if they can’t keep up the payments? If they cannot keep up with the mortgage payments, they will lose the entire home.
Do you have a mortgage and no protection in place? Please contact one of our advisers today for a full analysis of your circumstances and you will be advised if you require protection and what product would be best suited to you.
Please note: There is no legal requirement for you to take out a policy to protect your mortgage but you should be aware that a mortgage may be the biggest debt you leave behind for your loved ones should you pass away. Your home may be repossessed if you do not keep up repayments on your mortgage.
Q: – What is the difference between a reviewable premium Income Protection policy and a guaranteed premium?
A: Guaranteed premiums means that the amount you pay monthly would not change over the duration of the policy. By taking this option, it can offer the security of knowing exactly what your monthly premium will be for the full length of the contract.
Reviewable premiums are fixed for a certain period of time (normally five years) and after this the insurer would review your policy and premiums on an regular basis. This could mean that your monthly premium may increase, decrease or stay the same after each review. As prices might rise considerably with age and any medical conditions you may have, you could find that you are unable to afford the premiums.
One of our advisors will be able let you know what would be best suited to your circumstances.
Q: – Should you always write your Life Insurance policies in trust?
A: – Life insurance policies are an asset, so putting them into trust can affect on what happens to the pay out from the policy in the event of a death. One of the main reasons of setting it up in a trust is to avoid inheritance tax. When putting policies in trust can make the pay-out quicker as it will not be included in the probate process. Outside of a trust, any pay out could be subject to a deduction of up to 40% by the taxman.
Q: – I was a smoker when I applied for my policy but I stopped a few years ago, can I change the status now so that I would pay less of a monthly premium?
A: – As the application was based on your smoker status at the time it was submitted and underwritten you will be required to complete a new form. The new price and premium will depend on a number of disclosures including your age and any further medical disclosures.
For a full review of your current policies please contact us and one of our advisers will be able to go through the options available to you.
Q: -What does a deferred or waiting period mean on an income protection policy?
A: -This is a set waiting period before you can make a claim, usually this will be 4, 8, 13, 26 or 52 weeks.
The decision on which one to select will depend on your circumstances, e.g. means for supporting yourself before the payout, sick pay from work, savings, etc.
The longer the deferred or waiting period the lower the premium will be.
Q: – What is the difference between Term Assurance or Whole of Life?
A: – Term Assurance plans are more affordable than whole of life insurance. This is because the term life policy has no cash value until you or your spouse passes away. It is not worth anything unless one of you were to die during the course of the term. Then that’s when you receive money.
Whole of Life insurance always pays out, it is guaranteed that the policy will pay out upon your death. The sum insured is paid to your dependents following your death. Whole of Life insurance is more expensive because it is certain that the life company will eventually have to pay the sum insured. Monthly premiums are invested by the insurer into a life fund.
Q: – Will life insurers consider Inflammatory Bowel Disease (IBD)?
A: – Insurers will need more information about this, in particular the type of IBD, medication taken, how often are the flare ups and if there has been any hospitalization for the condition. They are likely to request further information from your GP surgery.
Following the information on the report, underwriters may offer cover.
General Insurance
Q: – When buying buildings insurance for my home, should I insure the building up to the market value of the property or the cost of rebuilding the property only.
A: – You should always ensure your home for the cost of rebuilding it only. This value usually tends to be lower than the market value of the property, however, can also be higher in some instances (for example, if the property is built from a material which is no longer readily available).
These days most insurers tend to provide ‘blanket’ buildings cover of £500,000 or £1,000,000, and hence you do not need to worry too much if you do not know the rebuild cost for your property.
Q: – Who can be a named policyholder on a home insurance policy.
A: The named policyholder on a home insurance policy is the legal owner of the property, i.e. the persons named on the title deeds to the property. No other persons can be a named policyholder for a home insurance policy.
Q: – If I work from home will this affect my home insurance?
A: – This should normally not affect if you are only carrying out admin or clerical work. However if you are working from home regularly then you should notify your insurance provider. If you have visitors for business reasons then you need to inform the insurance provider.
Q:- What is private medical insurance?
A:- This is paid by yourselves or if a company wishes to take out for yourself. This is not limited by insurance restrictions or requirements. This may include services which a patient or a family would like for long or short term.
Q: – If I take out Private Medical Insurance, how does it work?
A: – You pay regular monthly or annual premiums and the insurer will pay for some or all of the treatments depending on the policy coverage.
