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Frequently asked questions about UK Mortgages

Applying for a mortgage is complex process and choosing the correct mortgage scheme can be challenging. You’re bound to have some questions, and that is why we have compiled this selection of questions and answers about the UK property market. If you don’t find the answer you’re looking for, please get in touch with us at mortgages@sableinternational.com and our mortgages team will help with any question you may have. You’re also welcome to stop by our offices for a chat if there is anything more you’d like to know.

First-time buyer FAQ

Buying a house can be a stressful process. The transaction involves countless pieces of paper and the process is usually long and tedious.

Our first-time buyer FAQ covers everything you need to know about the UK property market.

 

1. How can I find the right deal for me?

There are thousands of mortgages from over 40 different lenders in the UK property market. In London, you typically have to outbid approximately seven other potential buyers to secure a property.

An experienced mortgage adviser should help direct you on making a decision that’s both competitive and suited to your circumstances.

2. Are there any schemes to help first-time buyers?

Yes, there are several schemes for first-time buyers, including the UK government’s popular Help to Buy scheme.

Housing associations also provide shared ownership schemes, where you buy a "share" of your home and pay rent for the remaining part.

3. Is it more difficult for a foreign national to secure a mortgage in the UK?

Yes, although this does depend on how long you’ve been in the UK. On paper, many foreign nationals appear to be "mortgageable" based on their experience, credit history and credentials, but are hard-pressed to secure a mortgage without a British passport.

Many foreign nationals also work on a contract basis, which makes it considerably tougher for them to get bank loans. For this reason, our mortgage division assists these individuals by approaching select lenders on their behalf.

4. How much deposit do I need to put down on my first home?

The minimum deposit that lenders accept is typically 5% of the property’s value. But these mortgages have a very high credit score requirement and all other aspects of the case have to fit lender criteria. They are hard to come by.

Most people start with at least a 10% deposit. The rates at this level are also more affordable and the product choice larger.

The more you can afford to put down, the more mortgage options you’ll have access to. Our research will outline the cost impact of putting down a higher or lower deposit, how your deposit amount will affect your mortgage options and how your deposit will affect the costs you incur over time.

5. What is stamp duty land tax?

Stamp Duty Land Tax (SDLT) needs to be paid on all property transactions. The tax is payable on sales and depends on the contracted purchase price of the property. This table shows which SDLT rates are payable on different property values:

Purchase price/lease premium or transfer value SDLT rate
Up to £125,000 Zero
Over £125,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 to £1 million 4%
Over £1 million to £2 million 5%
Over £2 million 7%
Over £2 million (purchased by certain persons, including corporate bodies) 15%

6. Are there any other costs involved?

Yes. In addition to stamp duty, your mortgage typically has an arrangement fee which can vary between 0% and 2% of the loan amount.

Most mortgage products come with a £999 arrangement fee.

This arrangement fee can be added to the loan, but it’s worth noting that you are then paying interest on this fee over a 25-year mortgage term.

Other costs to bear in mind include legal costs and a survey of the property.

7. How much can I borrow?

This depends on how much you earn and how much deposit you can put down on your home.

Lenders use affordability models that consider a very wide range of different factors. As such, income multiples can be misleading. Part of our research and advice process is to help you understand what your mortgage ceiling will be in lots of different scenarios.

8. How long should I let my mortgage run for?

This is governed by your age, expected retirement date and what you can afford. Most of our clients choose a mortgage that’s realistically repayable over 25 years. However, you can always choose a longer-term mortgage. Remember, the longer your mortgage lasts, the more interest you’ll end up paying.

9. What else will lenders want to know?

Almost everything. Lenders take a long look at your income, including type, amount, history, future sustainability and credit history. They also consider other mortgages you might have and the source of the deposit. They will also closely examine your bank statements to ensure they can verify all other information provided in the application.

10. Can I buy with someone else to keep costs down?

Of course. As long as you both have good credit history, enough income and a deposit to secure your mortgage, sharing the costs with a second party is always an option.

It’s important to ensure you know how the property will be split between the two of you, especially if one of you is paying more towards the deposit.

You have two options when buying with someone else:

  1. Joint tenancy: If you have chosen a joint tenancy, the part owned by you will automatically pass to the other person if you die.
  2. Tenants in common: Here, the property can be divided up as you choose. Your share will then be passed on to your estate if you die. This option has the advantage of allowing you to elect how rental income affects your tax return.

We can advise you on the impact of these two different options for your situation.

11. What type of viable mortgages are there?

Tracker mortgages tend to be the most popular variable mortgage deals. They follow or "track" the Bank of England base rate (plus a set percentage). There are other variable rate mortgages that track the bank’s base rate, the London Interbank Offered Rate (LIBOR) or a product reference rate.

Banks also offer fixed-rate mortgages of varying durations - two years through to ten years. The pricing of the various fixed rate durations is sensitive to the interest rate outlook. Other mortgage types include capped and collared mortgages, but these are less popular.

12. Can I get an interest-only mortgage?

Probably not. Interest-only is very much disappearing from the mortgage landscape in the UK. Where it is available is in circumstances where the loan-to-value (LTV) is at 50% and below or the property has substantial equity and the borrower has a very high income. In addition, where significant investments are held that could repay the loan, we are often able to arrange an interest-only mortgage. For most folks, however, they should be prepared to have a repayment mortgage.

13. Does Sable International charge me to do my research?

Yes. If we consider your mortgage to be a "standard" case, we’ll charge you a research fee of £195. A "standard" case is one where we don’t need come to a specific agreement with an underwriter at a lender regarding your case.

Where your case is outside lending policy, for example requiring a specific agreement with an underwriter, involves multiple scenarios or an aspect of commercial or non-resident lending, then our non-standard research fee of £375 applies.

Our clients have provided very positive feedback on our research outputs. We consider this research essential to the planning process of buying a UK property.

Our research fees are the only fees you pay us up-front. If we determine that you aren’t eligible for a mortgage, we won’t charge you a cent. In addition, the research fee is only charged once. We don’t re-charge you if we need to refresh or alter the options as you consider different properties. Once you’ve paid one research fee, our commitment is to get you to the finish line and into your home.

14. Does Sable International charge me a success fee?

Generally, no. Most lenders pay us between 0.3% and 0.35% of the loan amount as a success fee. We will only charge a top-up if the payment from the lender is below £750. In that case, we charge the difference between what the lender is charged and £750.

The above applies to non-resident mortgages, but we do charge an additional document handling fee of £200 on receipt of the full application with all the attached documents. These mortgages have a significant compliance burden and this additional charge covers that additional work.

Commercial mortgage success fees are charged on a bespoke basis.

Sable International is one of the leading foreign national and contractor mortgage specialists in London, helping non-residents and self-employed contractors obtain competitive mortgages since 2006.

At Sable International, we offer you advice – not just brokerage. Without the right advice, it’s all too easy to lose your chosen property thanks to a failed mortgage application. We help to make sure you get that mortgage for your dream property. And because a mortgage is often the largest debt you’ll ever have, we make sure our advice takes into account your overall financial position.

 

Mortgage video FAQ

Buying a house and getting a mortgage can feel intimidating because of the many steps involved. We’ve put together this video Q&A with Mike Abbott, Head of Sable International's wealth division, to answer some commonly asked questions and help simplify the process for you

 

Spotlight on Sable International's mortgage service

Mike answers a few questions about our mortgage service.

In this video you can find out:

  1. Why should someone use an independent mortgage broker like Sable? (0:12)
  2. What makes Sable different? (0:30)
  3. So Sable charges an upfront fee. How does that work, and what do I get for my money? (1:30)

What should you know about getting a mortgage in the UK?

Some essential details about getting a mortgage in the UK.

In this video you can find out:

  1. Who establishes how much I can borrow? (0:10)
  2. What taxes apply? (1:07)

Foreign national mortgages in the UK

Mike looks at some of the particular challenges faced by foreign nationals looking to get a mortgage in the UK.

In this video you can find the answers to:

  1. Is it more difficult for a foreign national or 'expat' to get a mortgage in the UK? If yes, why and how? (0:13)
  2. Once an expat has a mortgage, are there any restrictions they face, such as letting it out while living in their home countries. (1:15)

Mortgage top tips

A few top tips on how to get the best deal for your personal circumstances.

In this video you can find out:

  1. How would I go about getting the best mortgage deal for me? (0:12)
  2. What are some of the most common mistakes first-time buyers make? (0:45)
 

Mortgage jargon buster

If you’re in the process of applying for your first mortgage, chances are you’ve come across a few unfamiliar terms.

Here is our mortgage market jargon buster, to help make things as clear and understandable as possible.

A | B | C |D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

Advance

This is the mortgage loan itself.

APR

Annual Percentage Rate. This is the overall cost of a mortgage, including the interest and fees - assuming you will be paying off the mortgage over the whole term.

Approved in principle

Some lenders might give you a certificate showing the amount they are most likely to lend you, accompanied by the words "Approved in principle". Although this is not a guarantee of any kind, it can be helpful when registering with estate agents.

Arrears

If you default on your contract and miss a month’s payment, you will go into arrears.

B

Base rate

This is the rate of interest set by the Bank of England.

Buildings insurance

When you take out a mortgage, you will need to take out insurance to cover any damage to the home.

Buy-to-let

This is a way of purchasing property, with the sole purpose of letting it out to tenants. This type of mortgage may be slightly more expensive than a residential mortgage.

C

Capital

This refers to the money you borrow from a lender to buy a property.

Capped rate

The capped rate is the mortgage interest rate charged by your lender; it will never exceed the upper "capped" limit, regardless of any increases to the Bank of England base rate.

Cashback mortgage

This happens when the lender gives you cash on completion, which you can use in any way you choose. People often use this money for renovations or décor.

CCJ

This is a County Court Judgement, which could be made against you for non-payment of debt, making it more difficult to secure a mortgage.

Completion

This is the actual moment when you become the legal owner of the property.

Conveyancing

This is simply the legal process of buying and selling property and is normally done by a solicitor or specialist licensed conveyancer.

D

Defaulting

When you miss one or more mortgage payments and go into arrears, it is known as "defaulting".

Deposit

The amount you put down yourself towards the cost of the property. The minimum deposit is normally 5%, but you save an enormous amount if you can put down a deposit of 40%.

E

Equity

In mortgage terms, your equity is the amount you have left after subtracting the outstanding amount on your mortgage from the actual current value of your property.

Equity release scheme

This is a scheme which allows older homeowners to release the cash that is tied up in their property. The minimum age limit to do this is usually between 55 and 65 years old, but it will depend on the mortgage provider.

F

Fixed-rate mortgage

This mortgage option occurs when the mortgage interest rate remains the same for the initial period of the deal - usually two to five years - during which time your interest rates and payments will be prevented from rising.

Flexible mortgage

A flexible mortgage deal is often slightly more expensive than a conventional one, but the benefit is that you can pay more, pay less or even take a "payment holiday" from your mortgage. In this way you can pay off your mortgage sooner and save on interest.

Freehold

This means you own both the property and the land it is situated on.

G

Ground rent

A yearly fee that leaseholders pay to the freeholder who owns the land that the leasehold property is on.

Guarantor

This is a third party – normally a parent – who agrees to honour the monthly mortgage repayment if you are unable to.

H

Higher lending charge (HLC)

This is sometimes charged by the lender, when the buyer is borrowing more than 75% of the property’s value.

I

Intermediary

A mortgage broker or adviser who can arrange a mortgage on your behalf.

L

Leasehold

This is when you own the property or building, but not the land it stands on. Flats are usually owned on this basis.

Loan-to-value (LTV)

The size of your mortgage as a percentage of the property’s value. The cheapest deals are currently available if you are borrowing 60% or less.

M

Mortgage payment protection insurance (MPPI)

This is a form of special insurance that covers your mortgage for a specific time frame if you are unable to work due to accident, sickness or unemployment.

Mortgage term

This is the period of time over which your mortgage runs. The longer the period, the more interest you are charged.

Mortgage deed

The formal contract between the lender and the borrower, outlining the legal obligations of both parties.

N

Negative equity

This is when the value of your home falls to below the amount remaining on your mortgage.

P

Portability

A portable mortgage will allow you to transfer your borrowing from one property to another if you move, without paying any extra fees.

Prudential Regulation Authority (PRA)

The PRA is part of the Bank of England, and is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms.

R

Rebuild cost

The cost of rebuilding your home if it is destroyed, for instance, in a fire.

Re-mortgage

A re-mortgage occurs when you change your mortgage without selling or moving.  This is normally done to change to a different type of mortgage or to release equity.

Repayment vehicle

This is an investment or bank account that you pay money into each month, in order to save the money needed to pay off the mortgage at the end of the term.

S

Stamp duty

This is the government tax on buying properties that cost more than £125,000.

Standard variable rate (SVR)

SVR is a type of mortgage interest rate that you are most likely to go onto after your initial “tie-in” period. Your interest rate will move to the lender's SVR, which could be higher or lower than your initial rate.

Subject to survey and contract

This wording is included in any agreement before the exchange of contracts and allows the seller or buyer to withdraw from the property sale.

Sub-prime/non-conforming

This type of mortgage is geared towards people who have had credit problems; typically, they are harder to secure.

T

Tie-in period

This is the period during which you are "locked in" to your mortgage deal with your lender. During this period you would pay an early repayment charge to move your mortgage elsewhere.

Tracker rate mortgage

This type of rate is usually defined as a percentage amount above, below or equal to the Bank of England's base rate. Because the Bank of England can change rates at any time, your monthly payment can vary as your interest rate "tracks" this base rate.

V

Valuation

Lenders require you to carry out a basic inspection or "valuation" of the property to verify that it is worth the amount you want to borrow.

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Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services License issued by ASIC to deal in foreign exchange (1st Contact Group - AFS License number 335 126).

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