5 things your lender will keep secret
Filed under: Mortgages
Nevertheless, for all but the seriously rich, they are essential if you want to get onto the property ladder.
Mortgage Advice & Info
They are the experts so it stands to reason that they will ensure we are fully informed – doesn't it?
Actually no. Mortgage lenders are businesses, and while they operate within strict regulations – particularly following the credit crunch – there are some things they are not obliged to tell you, and frankly it wouldn't be in their interest to.
What lenders won't tell you
1. The deal you are applying for can be beaten by other lenders
Lenders want you to buy their own products and while they are not allowed to sell you an unsuitable mortgage, they don't have to tell you about better deals from their rivals. If you only go to one mortgage lender, you will only find out about its products, when there are literally thousands on the market.
A mortgage broker, on the other hand, works for you, and searches the whole market for the best deal for your needs.
David Hollingworth, spokesperson for broker L&C Mortgages says: "If a lender is offering you advice at all, rather than just information, it will only be on the products that it offers at the time. A borrower will therefore only get perspective on its range and no direct comparison with the wider market.
"Enlisting the help of a mortgage broker that can advise across the whole market has the benefit of seeking out the most appropriate deal at the most advantageous cost."
2. We've launched a better rate since you made your application
Once you have made your mortgage application things may take a little longer than you think – probably about a month or so until you get a full offer.
Lenders are currently changing their deals regularly, sometimes three times a month, which means that your own mortgage lender could launch a more suitable deal while you are still going through the application process. You are entitled to ask if you can switch to this rate, but they won't be in any rush to let you know.
One quick tip is to regularly check the lender's website to see what's on offer. If a better deal is launched, give them a call and ask if you can apply for that instead.
3. If you don't get your survey through us, it could be cheaper
When you make your full mortgage application you will be asked to give your bank details, to pay for your valuation. This is required by the lender but you can choose to upgrade it to a Homebuyer's Report or a full Building Survey if you want more information on the state of the property.
All this can be done through your lender but what they may not mention is that you can often get a Homebuyer's Report or Building Survey cheaper by arranging it with a surveyor yourself.
Just double check if your chosen surveyor is acceptable to the lender. They may make you pay for their valuation anyway, but it can still work out cheaper to arrange your own survey.
4. We are currently undergoing delays in processing mortgage applications and this could mess up your purchase
In an ideal world you would make your mortgage application, post your documents the same day, and the day after the lender would make an offer subject to valuation. Then they would commission the valuation, it would be done within a week and the full offer issued.
In reality mortgage offers take a lot longer, from a couple of weeks in the best case scenarios to a couple of months in the worst. If your seller is in a rush, a delay could mean you lose the house.
Sometimes a lender is swamped with applications when they launch a cheap deal, and their processing times suffer as a result. But they are not going to tell you that.
Hollingworth says: "The processing times can vary hugely depending on how busy a lender is and speed can be vital especially in the case of a property purchase. A broker will have a good handle on current processing times so can factor that into their recommendation."
5. You are on a loan-to-value cusp. Put a little extra towards your mortgage and get a cheaper deal
Lenders offer different interest rates based on the proportion of the property's value that you need to borrow – if you have a 10% deposit you need to borrow 90%. The standard tiers are 90%, 85%, 75% and 60%.
The higher the LTV tier the higher the rate you will be charged and the difference can be significant. If your level of deposit means you hover just above one of these tiers, you will pay a lot more in interest charges than a borrower with a little bit more to put down.
Say you have a £48,000 deposit and you want to buy a property for £200,000. You would need to borrow £152,000 which is a loan-to-value of 76%. This means you will not be able to access any 75% LTV mortgages and you will have to go for an 85% LTV deal, which will be significantly more expensive.
For example a five-year fixed rate up to 75% LTV with Yorkshire Building Society is 2.99%, but it shoots to 4.14% for those in the lender's next tier, up to 85% LTV.
By putting an extra £2,000 towards the property, or looking for a marginally cheaper home, you could tip yourself into the 75% LTV category and save yourself substantial sums.
See the latest mortgage rates and get expert advice