UK Mortgage: Lending Terms, Interest Rates And Arrangement Costs
YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED ON IT.
THE PRODUCTS INTRODUCED ON THIS PAGE ARE REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (FCA).
CHARLES HAMER FINANCIAL SERVICES ARE AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
As an alternative to raising funds on the French property, subject to sufficient equity in your UK residence, is to raise funds in the UK in sterling.
It is important, however ,to remember that the mortgage in the UK will not qualify for interest tax relief.
The amount of loan achievable is determined as a function of income multiples and the value of the UK property.
Proof of income is usually required in the form of payslips and P60s for employees or 3 years P&L accounts and 3 years personal tax returns for the self-employed.
Term and method of repayment
Whilst in principle there is no maximum mortgage term, most lenders prefer to apply a nominal maximum term of 25 years, whilst it is normally in your interests to ensure the mortgage is fully repaid upon or before normal retirement age. The choice of method of repayment of loan capital falls into 2 basic categories:-
Capital and Interest repayment mortgage
Monthly payments include repayments of loan capital and interest with the amount of interest normally being calculated against the reducing capital balance. Gradually the capital outstanding reduces throughout the loan term to nil.
Interest-only is paid to the lender. It is left to the borrower's discretion as to how to repay the original capital borrowed by the end of the mortgage term.
Unlike most mortgages in France, whenever life assurance is required by the lender, this would normally be arranged individually by the borrower and assigned to the lender. Since the mortgage and the death sum assured are both registered in Sterling, unless the mortgage scheme allows for payment of interest to be deferred, the level of life cover, when required, does not have to exceed 100% of the initial mortgage value at the start of the term.
Interest rates are so diverse in the UK that it is difficult to generalise. Please contact us for an update of the schemes that are currently available. We can then provide specifically relevant Financial Services regulated quotations.
Charge rates of interest are generally lower for large loans and when the total mortgage charged against the UK property is less than 60% of value. The interest rate may be fixed for the whole loan term (applicable only to a few lending sources), fixed for a period from 1-10 years and variable thereafter, capped for the whole term (rarely) for periods of up to 10 years, or variable with the interest rates subject to review at any time and without notice. Short term discounts, base rate trackers and cashback schemes are also available.
SETTING UP COSTS OF A UK REMORTGAGE
For a UK remortgage the following charges should be considered, although, in certain cases with the various incentives for new borrowers presently available several of these charges can be avoided or refunded. We recommend therefore, if you are considering raising funds in the UK, to contact our office requesting a more precise quotation informing you of the charges to be expected in financing the French property purchase.
This will depend on the value of your UK property, certain lenders will not levy a valuation fee, whilst others will refund it on the acceptance of the mortgage offer.
Fees incurred are for registration of the mortgage deed including duties payable to the Land Registry. Fees will vary considerably in accordance with the overall loan and property value. We strongly recommend you to obtain a quote from your solicitor.
Lenders arrangement / booking fee
These fees will depend on the type of mortgage product chosen.
Mortgage indemnity Premium/High loan risk fee
Occasionally whenever the total mortgage on your UK property exceeds 75% of the value of the property, the lender will indemnify itself against losses which may arise from the repossession and forced sale of the property. A once only charge, the cost of this indemnity may be passed on to the borrower by either being added or deducted from the mortgage advance. The fee can however be hefty, especially when the overall mortgage is over 90% of the UK property value.
Existing lender redemption penalty
If you presently have a fixed rate in the UK, remortgaging for the French property may incur early redemption penalties with your present lender.
Most of the above fees can be avoided or reduced if you applied for an additional loan ("further advance") from your existing lender. The downside to this approach can be that, for the less flexible lenders, higher or standard interest rates only may be charged, or lending limited to only 75% of your UK house value.