Independent Mortgage Doctor

Frequently Asked Questions

Why Do I Need A Solicitor?

Solicitors play a vital role in the house buying process, and you won't obtain a mortgage without one. However, before you appoint your solicitor, check that he or she is acceptable to the lender. Mortgage companies normally require at least two partners in the practice, and for the firm to have been in existence for a certain number of years.

Also, if you are moving locally check that your buyer or the person you are buying from hasn't instructed a solicitor from the same firm. If they have 'conflict of interest' regulations it may mean that one of you will have to switch firms.

As an alternative to a solicitor, you can use a licensed conveyancer who carries out exactly the same legal tasks as a solicitor, the only difference being that a conveyancer specialises only in property related legal work.

The role of the solicitor in the house buying process:

To request property documents from the vendor's solicitor. (To provide the same to your buyers if you are also selling a property).
To carry out a local search with the local authority to check for development, or any other plans that might have an impact on the price or desirability of the property you wish to buy.
To check any additional legal documents, such as lease and title deeds, which relate to the property.
To send a list of questions about the property, called pre-contract enquiries, to the vendor's solicitor. When responding, the vendor must reveal any known issues that might affect the buyer, and declare any items that they intend to remove from the property or garden.
To prepare a contract for both parties' signature, once:
- terms of the contract, including completion dates, have been agreed;
- searches have been returned;
- enquiries have been answered;
- your mortgage lender has offered a suitable amount;
- your buyer (if there is one) is ready to proceed.
To exchange contracts with the vendor's (and, if relevant, your buyer's) solicitor which makes the agreement(s) binding.
To prepare a document for your signature which will transfer the "title" of the property to your name.
To perform Land Charges Registry and Land Registry searches (although some may initiate this before exchanging contracts).
To ask you to pay a deposit if you are paying one.
To complete the purchase on the agreed date.

Completion involves:

sending your payment to the vendor's solicitor;
receiving the property Deeds, called "Title Deeds", from the vendor's solicitor;
transferring ownership from the vendor to you;
stamping the transfer of ownership;
activating the mortgage;
registering ownership with the Land Registry;
forwarding the Deeds to the lender if you have a mortgage, or dealing with them according to your instructions if you do not.

The Survey

The purpose of a survey is to inspect the property in detail, so that you know exactly what you are about to take on. You may ask yourself "What is the downside?" Well, you will have to pay for it - even if you never buy the house.

If no hidden problems are thrown up by your survey, you can relax - safe in the knowledge that what you see is what you get, more or less.

However, if substantial defects are uncovered, you might get room for negotiation on the purchase price. Alternatively - if the news is particularly bad - you may decide to pull out of the deal altogether. Either way, you can save an awful lot more money in the long term.

A Valuation Is Not A Survey!

Don't confuse a survey with a lender's Valuation. This is for the lender's own use and merely tells them that the property is (hopefully) worth what you are paying for it. If you don't pay your mortgage, they are entitled to sell the property and the valuation report determines whether (at current market rates) they would get their money back. They may give you a copy of the report, but it is unlikely to provide enough detail for you.

The Two Types of Survey:

Homebuyer's

Unless the property you are looking at is in very bad repair, this type of survey is adequate in most cases. The surveyor will check all visible and accessible parts of the property. The report, normally 5-10 pages long, will describe the main fabric of the property, and list any defects that need attention.

Full Structural

If the property was built before 1900, or if you are planning substantial renovation, it is worth getting a full structural survey. The report, which may be 10 - 20 pages long, depending on the size and state of repair of the property, will provide a full description of the structure, list all the defects (including minor ones), and request specialist reports if the surveyor suspects problems with, for example, drainage or subsidence.

How Do I Choose My Surveyor?

Your lender will appoint a surveyor to carry out the valuation for mortgage purposes, so it may be cost-effective to ask the same company to carry out the Homebuyer's or Full Structural Survey at the same time. However, before you give the go-ahead, obtain telephone quotes from one or two other companies. Firstly, the lender's surveyor is acting for the lender first and foremost, so you may wish to seek a more independent assessment of the property. Secondly, as valuers increasingly compete for a share of the market you might be surprised at the different quotes you get.

How Much Can I Borrow?

Most lenders use the calculations below to work out the maximum loan they will advance.

However, the amount of your deposit and the purchase price of the property will affect what you can borrow. The higher your deposit, the better the terms on which you are likely to be able to borrow.

Bare in mind that your circumstances, the property value, and the lender's assessment may bring about a different maximum loan figure, so use the calculations as a rough guide only for now.

Maximum Loan Based On Income Level

*Single person*		Usually 3 to 3.5 x annual salary but 4 or even 5 times may be available

*Two people*		Whichever is the greater:
		Either:
		Usually 3 to 3.5 x first annual salary + 1 x second salary but 4.2 + 1.6 may be available
		Or
		2.75 x joint income although 4 times joint income may available

The Interest Rate Minefield!!

Current mortgage interest rates depend upon what's going on in the financial markets. As these rates go up or down, so too can your monthly mortgage payments.

However, the good news is that, to encourage you to buy from them, mortgage lenders are constantly putting together 'special offers' such as fixed, discounted or capped rates.

Thus you can choose a rate that fluctuates with the market, or limit the uncertainty by choosing a rate that, for a set period of time, will be less susceptible to dramatic changes.

As a mortgage intermediary, Independent Mortgage Doctor has access to many exclusive deals that are not available to consumers directly.

The Different Interest Rate Types

Variable		Commonly referred to as the standard variable rate, this normally rises and falls in line with Bank Of England interest rate changes.
Discounted		Still a variable rate, but set at a fixed percentage amount below the lender's standard variable rate, usually for a short period of time. At the end of the set period, the mortgage reverts to the lender's variable rate. There are often charges if you wish to pay back (redeem) your loan before the end of the discounted rate period. In some cases these charges also apply for a short period thereafter.
Fixed		This rate does not move for a set period - usually for a number of years. At the end of the period, the mortgage reverts to the lender's variable rate. Although you can often choose the length of the fixed period, the selection will be limited to current offers. There are often charges if you wish to pay back (redeem) your loan before the end of the fixed rate period. In some cases these charges also apply for a short period thereafter.
Capped and Collared		These rates limit your payments to fluctuations between a maximum and minimum interest rate for a set period of time. These rates may only be available at certain times, and may also incur a charge if you wish to pay back (redeem) your loan before the end of the capped/collar rate period.
Tracker		This rate usually follows the advertised Bank of England Base Rate and can be either a fixed percentage above or below or even track the actual rate itself for a certain period of time. The rate can be changed by the Bank of England and a meeting takes place once a month to determine any changes. At the end of the set period, the mortgage reverts to the lender's variable rate. There are often charges if you wish to pay back (redeem) your loan before the end of the Tracker rate period. In some cases these charges also apply for a short period thereafter.
Cashback Incentives		As an alternative to special interest rates, lenders may offer 'cashback' incentives to persuade you to choose their product. With 'cashback' the lender gives you money when you complete on the mortgage. In return, you are usually tied to the standard variable rate for a set period, and have to repay some or all of the cashback if you wish to pay back (redeem) your loan sooner.