A mortgage is a huge commitment. This means it’s vital to get both the right product and the right lender. Giving some thought to what you want can make the selection process a lot easier. With that in mind, here are some points to consider when considering specialist lending.
What type of mortgage do you want?
If you’re buying a place to live, you’ll need a residential mortgage. If you’re buying a property to let out to residential tenants, you’ll need a buy-to-let mortgage. If you’re buying a property to let out on a short-term basis, then you’ll need a commercial mortgage. If you’re wanting to build your own property, then you need a self-build mortgage.
If you’re living, or planning to live, outside the UK, then you’ll need a mortgage that is suitable for ex-pats. Similarly, if you’re planning, or even just considering, any changes to your life, then you need to think about how you’ll accommodate that.
These don’t even have to be long-term changes to be significant. For example, say you are buying a property with a view to starting a family. Until the children arrive, however, you have a couple of spare rooms. If you’re thinking of earning some extra cash by letting these out, you need to make sure you choose a mortgage that allows this.
What mortgage format do you want?
The two basic mortgage formats are interest-only and repayment. Repayment mortgages can be further subdivided into various options. For example, you can have standard repayment mortgages and offset mortgages.
With standard repayment mortgages, you simply pay back the lender each month according to a predefined formula. With offset mortgages, you keep your savings with your mortgage lender. The interest you are due on your savings is set against what you owe on your mortgage.
You also have the choice of fixed-rate and variable-rate mortgages. In either case, you can expect the rate to be offered for a certain period e.g. between two and five years. After this, you would either remortgage or go onto the lender’s standard variable rate.
What mortgage features do you want?
Are there any particular features you’d like to see in your mortgage? For example, would you like the ability to make flexible repayments or to take payment holidays?
How attractive a customer are you?
All the questions so far have been about figuring out what you want from a lender. Depending on your answers, you may already have discovered that specialist lending is really the only route for you. In simple terms, the less demand there is for a product, the less reason there is for lenders to offer it. This means that it effectively becomes a specialist product.
If, however, you’re looking at a product that is offered in the mainstream, your next step would be to think realistically about how attractive you would be to mainstream lenders. In particular, consider:
Your residency status
Your age
Your employment status
Your credit history
Your deposit
Basically, look at the situation from a lender’s perspective. They want to get their repayments in full and on time over the duration of the loan. How obvious is it that you can make that happen for them? The more obvious it is, the more likely it is that you’ll be able to find a suitable deal in the mainstream if you want it.
Making your final choice
Assuming you have a choice between mainstream lenders and specialist lenders, you should make it with care. First of all, resist any temptation to assume that the mainstream lenders will offer the most economical deals just because they’re bigger. They may do but it’s strongly advisable to check.
Secondly, while price is important, there may be other factors you want to consider, like customer service. You may be prepared to pay a bit extra for the reassurance of dealing with a lender who sees you as an individual rather than a row of figures on a statement.
The FCA does not regulate commercial mortgages and we act as introducers for it.
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