Should you remortgage with your Lender’s Offer?

2024 is set to be a busy time for many homeowners, with the initial fixed term periods on mortgages expiring for a lot of clients across the market¹, leading to some big decisions being required on remortgaging options. So, should you remortgage with your Lender’s Offer

What happens when your initial mortgage period expires?

Your initial fixed-term period will often expire after two years or five years, depending upon the specific deal, and after this, you’ll be put onto your mortgage lender’s Standard Variable Rate (SVR)².

As you may be aware, the interest rates on the SVR may be higher than those that you can obtain with a fixed-rate deal², so it’s always worthwhile taking action ahead of your fixed-term period expiring, to ensure that you’re not paying more than you need to, and that you’ve got a mortgage deal that fits your exact circumstances.

With interest rates having risen considerably in recent times, it’s also highly likely that the mortgage deals you will come across may be significantly higher than your existing deal, so there’s a lot at stake to ensure that you’re getting a fair rate when it comes to your renewal.

Remortgage with another Lender or remortgage with your Lender’s Offer

How does it all work? Ahead of your mortgage’s fixed-term period coming to an end, we’ll get in touch with you to discuss the options available to you, but to summarise, there is often a choice between a full remortgage, or a product transfer.

A product transfer is simply switching from one mortgage product to another, at your same lender. This is often a straightforward process and allows you to take advantage of some of the fixed-rate deals available from your existing lender, to prevent you going onto the Standard Variable Rate.

However, in some cases, there may be other deals available from other lenders in the market that are more suited to your current circumstances, and to access these would require a remortgage. So, should you remortgage with your Lender’s Offer

The remortgage process take longer, and is similar to that of when you first applied for a mortgage³. There would be evidence required of your earnings and property valuations undertaken, with more chance of fees payable to lenders, however, some may find that this inconvenience is offset through accessing deals that could possibly save more money and be of greater fit to your ever-changing circumstances.

How to know what’s most appropriate for you

It’s not always easy to know what’s right for you and your circumstances, so that’s where the value of professional mortgage advice comes in. We’re here to listen to your exact situation and to recommend the products that we believe are the most appropriate for you based upon looking at a wide range of lenders and exclusive deals that aren’t available on the high street.

It’s highly likely that your own lender will also reach out to you with offers of product transfers, however we would always recommend that you seek our experienced, professional advice before taking up any offers to ensure that these work in your interest as well as theirs. We’re more than happy to arrange both product transfers and remortgages, but pride ourselves in listening to your exact situation before giving bespoke advice that’s tailored to you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

Sources

1. Statista (2023) Fixed rate mortgage loans coming up for renewal in the UK from 1st quarter 2022 to 3rd quarter 2024. Available at:  https://www.statista.com/statistics/1399875/fixed-mortgages-for-renewal-by-interest-rate-uk/ (Accessed 21 November 2023)
2. MoneySuperMarket (2023) What is a Standard Variable Rate mortgage?. Available at: https://www.moneysupermarket.com/mortgages/standard-variable-rate-mortgages/ (Accessed 21 November 2023)
3. Experian (2023) Remortgaging. Available at: https://www.experian.co.uk/consumer/mortgages/types/remortgage.html (Accessed 21 November 2023)
   
   Please be aware that by clicking on to the above links you are leaving The Finance Housewebsite. Please note that The Finance House, nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.

All the information in this article is correct as of the publish date 30^th November 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
For more information, go to Impartial Mortgage Broker — The Finance House

New HMRC rules on Income Tax changes are due to take effect on 1^st January 2024, targeting those actively making significant money from side hustles – whether it’s profiting from selling crafts & hobby items online or renting out a place on Airbnb, for example, you could be caught out unless your tax affairs are in order¹.

In the aftermath of the Covid pandemic and as the Cost-of-Living crisis squeezed disposable incomes further, it’s no doubting that many have sought to make an additional income on top of their day jobs, so these changes by the HMRC are a response to the growing volume of people making money but not declaring it via the traditional manner¹.

The HMRC have recently invested over £36m in establishing a dedicated team to monitor online sales, and big firms such as eBay, Uber and Airbnb are now being required to report seller’s income to HMRC¹. This means that big sellers online or those making a few pounds on the side as a delivery driver or casually renting out your home via an online platform could land you in hot water if you don’t declare your income fully.

Who does it affect?

Many of us may be familiar with using buying & selling platforms such as eBay to sell secondhand goods or clothing, and according to tax experts, provided you are not considered a ‘trader’ by the HMRC, then you will be fine to continue as you are – but if your purpose is to buy-to-sell, or make considerable volumes of craft items that are purposely to be sold at profit, then you could be affected by the changes¹.

Anyone who earns less than £1,000 a year in side-gigs does not have to pay tax or declare income, thanks to the Trading Allowance currently in place². However, earnings above this amount do need to be declared and would be subject to income tax changes and national insurance, under the new HMRC regulations.

Recent years have seen a huge rise in popularity of room-rental opportunities, with online platforms such as Airbnb making it easy to make substantial second incomes from short term rental bookings. Under the Government’s ‘Rent a Room Scheme’, you are permitted to earn up to £7,500 a year tax-free from letting out furnished accommodation³, however, if you go above this amount then you must contact HMRC and request that your tax code is changed, or complete one of their self-assessment tax returns.

How to know if you are eligible

Whether you’re eligible to pay tax on online sales depends on whether you are classed as a ‘trader’ by the HMRC. The HMRC may decide this if you buy and sell online regularly with the aim of making a profit⁴. You can check how HMRC views your circumstances at www.gov.uk/check-additional-income-tax.

It’s important to clarify that these new rules are not aimed at the average person clearing out their attic and selling unwanted items online without intending to make a profit, and this is unlikely to be classified as trading, even if you exceed your £1,000 allowance¹.

Similarly, if you occasionally make cakes for friends and family and they pay you small sums to say thank you, then you may not have to pay tax on it. The intention behind the HMRC income tax changes are to ensure fair payment of income tax from prolific online sellers running a commercial enterprise, or making large volumes of income from services that would previously go unrecorded on self-assessment tax forms¹. However, there are doubtless grey areas as to exactly what is defined within the new regulations, so if you are in any doubt, it’s advisable to speak to the HMRC or to seek independent financial advice from a trained professional. Go to Independent free Mortgage Broker Mortgages — The Finance House

If you are concerned regarding an historical income, it is also worthwhile contacting the HMRC, it pays to be proactive and disclose any dealings upfront, then it may result in receiving a less-harsh penalty than you might otherwise receive¹.

When are the deadlines?

Any income for the tax year ending on April 5, 2023 need to be reported to HMRC by January 31 next year¹.

As always, it’s worth seeking independent financial advice if you have any queries regarding your position.

Sources

1. This is Money (2023) Is the taxman coming for YOUR side hustle? Airbnb, Ebay and Uber to hand over income data directly to HMRC. Available at: https://www.thisismoney.co.uk/money/bills/article-12640869/Is-taxman-coming-hustle-Airbnb-Ebay-Uber-hand-income-data-directly-HMRC.html (Accessed 18 Oct 2023)
2. The Times Money Mentor (2023) Side hustles: the crucial £1,000 tax rule. Available at: https://www.thetimes.co.uk/money-mentor/article/side-hustle-tax-uk-need-to-pay-hmrc/ (Accessed 18 Oct 2023)
3. Gov.UK (2023) Guidance: HS223 Rent a Room Scheme (2023). Available at: https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2023 (Accessed 18 Oct 2023)
4. Gov.UK (2023) HMRC Business Income Manual. Available at: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20060 (Accessed 18 Oct 2023)

All the information in this article is correct as of the publish date 26^th October 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

Should I overpay my mortgage? Whilst many people may be struggling to keep up payments on their mortgages in the wake of steep interest rate rises, there are a significant number of homeowners who may be wondering whether it is worthwhile paying more than the minimum statutory repayments each month, with the aim of helping to save money in the long run.

We look at some of the pros and cons of making a mortgage overpayment each month to see whether the average homeowner could be better or worse off by making an additional payment each month.

Here’s a simplified example to show how it could work –

If someone had a £150,000 mortgage, with a term of 20 years at a rate of 5%, they’d be required to pay back a total of £237,584 in total when making the contracted standard repayment each month. However, if they made an extra monthly overpayment of £100 on top of the existing payment, the cost of repaying the mortgage would fall to £223,327 – saving them approximately £14,300 and enabling the homeowner to pay back the mortgage nearly 3 years quicker.

Naturally there are more complexities in real life, and fluctuating rates each time you remortgage, but generally it goes to show that in many cases it may be possible to pay off a mortgage faster and reduce the amount of interest paid by making relatively small extra overpayments each month.

Making a mortgage overpayment

We’re all different, with different circumstances, so it’s wise to seek professional advice and guidance before deciding to arrange a mortgage overpayment. Your existing mortgage lender is likely to have some advice on their website, but we’d also advise that you talk to us too. We’ll be able to look at your precise circumstances and help give an illustration of what you can achieve by making an overpayment that suits your own lifestyle needs.

How much can you overpay?

The amount can be whatever you can manage, whether a small amount, right up to a general maximum of around 10% of the remaining balance each year¹. Overpayments above this maximum amount can be liable for early repayment charges from your lender, so it’s wise to consider this before setting a precise amount. We can help you find the optimum amount that you’d like to repay each month by working with you – simply contact us to arrange an appointment accordingly.  

When deciding how much to overpay my mortgage, it’s important to consider the level of disposable income that you need to enjoy your current lifestyle, and especially any forthcoming expenditures – for example, having money set aside for any family holidays, activities, vehicle maintenance bills or household issues, for example.

What are the benefits of overpaying?

Aside from reducing your mortgage debt more quickly, and potentially saving money on the amount of interest owed, there are additional benefits that can be seen from overpaying your mortgage.

• If your mortgage rate is higher than your savings rate, you may find that it is more beneficial to pay back the mortgage and reduce the interest owed, compared to the amount of interest that your money may make while it is sitting in a bank account.
• If you pay more of your mortgage off sooner, this can sometimes put you in a stronger position for a cheaper mortgage deal when your existing one is due for renewal. This is because you will have more equity in your property, and your loan-to-value (LTV) is decreased, which often opens up more choices when it comes to available rates for mortgages.

What are the drawbacks if I overpay my mortgage?

If you have other debts which have higher interest rates, such as credit cards or additional loans, then it may be more beneficial to pay these off first before you overpay my mortgage. It’s worth considering any other costs you are likely to incur, and factoring these into whether you can afford to make a mortgage overpayment each month.

With interest rates rising, it’s also worthwhile doing your homework to see what your money could earn you if it’s saved in a high-interest account – there are chances that in some cases it may be more beneficial to save your money rather than pay additional amounts on your mortgage.

It’s important to think carefully about the amounts of money that you may wish to utilise on either overpaying or saving before going further, before looking at the various options available to you. It could be worth seeking financial advice for this element before making a decision.

As mortgage advisers, we are able to assist you in the area of what your mortgage circumstances may look like if you were to consider an overpayment, the impact that this could make on your mortgage and assistance in how you go about facilitating this.

To contact us go to Impartial Mortgage Broker Mortgages — The Finance House

Sources

1. MoneySavingExpert (2023) Ultimate Mortgage Calculator. Available at: https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/ (Accessed 25 Sep 2023)

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Bank of England Raises Interests Rates to 5.25% Today, the Bank of England has announced that they are increasing the base rate to 5.25%. This rise is the 14th in a row by the Bank of England as they seek to control inflation (the cost of living)1, by making it more attractive to save money and reduce consumer spending by increasing the cost of borrowing money. Latest data indicates that inflation is starting to reduce from the highs seen earlier this year, standing at 7.9% for the latest figures from June.2 How will this affect my mortgage? The overall cost of borrowing money may continue to rise further, so it is important to look at your individual circumstances to see whether you are affected directly by the change today, or whether you may start to feel the difference when your current mortgage term comes to an end. If you are on a fixed rate mortgage, your monthly repayments will be unaffected by the rate rise for the period that it is fixed for, however when it comes to finding a remortgage, there may be a significant increase in the monthly repayment amount.If you are on a variable-rate tracker mortgage linked to the Bank of England base rate, you will see an immediate impact on the amount you repay. If you are on your lender’s Standard Variable Rate (SVR), then you may see a rise in your monthly repayments, depending upon the decision of your lender. Let us see how we can help If you’re in any doubt as to what kind of mortgage you hold, or if you have any queries here, please do not hesitate to get in touch for our professional advice on your mortgage. There’s an overwhelming amount of information online, some of it is conflicting or not applicable to you, so we would recommend you contacting us to let us look at your individual circumstances to provide bespoke information to allow you to make educated decisions to meet your financial goals for now and the future ahead.  Contact us for a review   Mortgage rates could be better than you think. Despite the doom and gloom from the national headlines of prices and rates going up, in the mortgage world, things are starting to change, with some welcome announcements recently that certain lenders are announcing fixed-rate mortgage products at lower rates than seen earlier in the year.3 If you’ve been thinking of moving home, or if you have a remortgage coming up and you’ve been dreading what the potential costs could be, let us see how we can help. We have the ability to search across the market and can access deals that aren’t found on the High Street, matched to your exact circumstances and financial situation. You might be surprised at what we can find – so please don’t be put off by what you read online and book an appointment with us. Please note, your home may be repossessed if you do not keep up repayments on your mortgage.   All the information in this article is correct as of the publish date 3rd August 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Sources: The Bank of England. 2023. Why have interest rates gone up?. Bankofengland.co.uk. Available at: https://www.bankofengland.co.uk/knowledgebank/why-are-interest-rates-in-the-uk-going-up [Accessed 01 Aug 2023].Office of National Statistics (2023) Inflation and price indices. https://www.ons.gov.uk/economy/inflationandpriceindices [Accessed 01 Aug 2023]The Guardian (2023) Mortgage rates ease as Bank of England’s bitter medicine shows signs of working. Available at: https://www.theguardian.com/business/2023/jul/30/mortgage-rates-ease-as-bank-of-englands-bitter-medicine-shows-signs-of-working [Accessed 01 Aug 2023]

With the news this month that average mortgage rates have now reached their highest level in 15 years – 6.66%¹, and that over a million people are facing a hike of £500 a month in their mortgage repayments by 2026², it highlights the importance of seeking professional mortgage & protection advice in such a volatile market.

If you’re looking to move home, or have a remortgage coming up soon, then it’s highly likely that your monthly mortgage repayments will be much larger than what you’re used to, however, with the complexity of the deals available, we are ready to help find the most suitable deal for your circumstances, for when the time comes.

Plan ahead & speak to us

Given that mortgage repayments are likely to rise, the wisest thing you can do is to plan ahead to see how this impacts your finances, and identify if there’s anything you need to change now, which will benefit you much more when it’s time to move to the new deal.

You’ll most likely be contacted by your lender, offering deals and opportunities to change your mortgage, but we would recommend seeking our advice before making any decisions.

As your mortgage & protection advisers, we are here to support you through the challenging times. Book an appointment with us to review your existing deal, and we’ll be able to look across the mortgage market across deals from a wide range of lenders, and have access exclusive deals that are not available on the high street.

We’ll take time to look at your exact circumstances and build an understanding of your goals, which will help us to find the most suitable mortgage for you. In such a turbulent and fast-changing time, you need to be sure that you are making the most appropriate, well-informed decision for your situation, so we are ready to give you the advice you need for when you need it.

What to do if you’re struggling

We know that times are tough right now, so if you are worried about meeting your existing mortgage repayments, then we want to do what we can to point you in the right direction to get help at the earliest possible opportunity.

Start by talking to your mortgage lender and make them aware that you are struggling. There are a range of measures that they may offer to help with a situation, such as switching the mortgage to interest-only for a temporary period or reducing monthly payments for a set timescale, for example.

At the same time, it’s worth bearing in mind that making changes, even temporary ones, may result in higher monthly payments in future or paying back more overall. Mortgage borrowers should carefully consider any steps they take and customers who can keep up with their payments should continue to do so.

For this reason, as well as speaking to your lender immediately, we also recommend contacting us at the same time to talk through anything related to your mortgage, your monthly payments or even if you are concerned about how you could be affected if rates were to rise further – we are here to help. We will be able to look at your specific circumstances, explain everything that you need to know and help you make decisions that are the most appropriate for you.

Independent free Mortgage Broker Mortgages — The Finance House

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. 

Sources

BBC News (2023). Mortgage rates soar to highest level in 15 years. Available at: https://www.bbc.co.uk/news/business-66153812 (Accessed 17 July 2023)

Since the 2008 banking crises, the need for a deposit have stopped renters from becoming homeowners as they could not get a mortgage without a deposit. With house prices and the cost of living rising, renters have been unable to pay their rent, keep up with bills and save large amounts for a deposit.

At last this is changing.  At least one lender is now introducing a Track Record mortgage – the first of its kind.

They looks at a renter’s history of making their rent payments, and if they meet affordability criteria, they can obtain a mortgage without a deposit.

This could turn a generation of renters into homeowners.

Key eligibility criteria for a mortgage without a deposit.

Each applicant must be a First Time Buyer Each applicant must be aged 21 or over The same people who are renting now (and have been for the last 12 months) must be the same people on the mortgage Must have proof of having paid rent for at least 12 months’ in a row, within the last 18 months Must also have 12 months experience paying all household bills within the last 18 months Each applicant will have no missed payments on debts / credit commitments in the last 6 months The monthly mortgage payment must be equal to or lower than the average of the last 6 months rental cost The deposit must be less than 5% Maximum loan size £600,000 Not available on New Build flats. For more information on a mortgage without a deposit, contact Colin at: colin@thefinancehouse.co.uk or ring 01273 857 024