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Completing Your Mortgage

Completing Your Mortgage

Demand for residential sales has been resilient in the face of a torrid economic climate, as buyers rush to take advantage of the Chancellors Stamp Duty holiday. As the window to net yourself a stellar deal on a property begins to shut, these 6 points taken from Interlet’s Buyer’s Guide will help you avoid potentially time consuming mistakes that could stop you completing before March.

What’s the Rush?

The holiday on Stamp Duty Land Tax (SDLT) expires with a raft of other Coronavirus related measures on the 31stMarch 2021, so why are people rushing to get their offers in now?
The answer is simple – Completion. Completion is the process by which money changes hands and the property is transacted. Everything that happens beforehand, with offers being negotiated and accepted, doesn’t bear on the tax status of the sale. This means that should an offer be formally accepted by the seller before the 31st, but the sale competed after the 31stit will not qualify for the holiday and the full rate of tax (starting at 2% for property valued above £125k) will apply.

This is important as historical trends show that for residential sales completed in March (before the deadline) 92% were agreed “sold subject to contract” in November. However if you look at sales agreed in January only 54% were completed by end of March.

See below for our graph showing the historic trends for sales that usually complete by the end of March.

Getting from “subject to contract” to completed can take months, primarily due to the process of due diligence which has to be carried out by you and your bank (for a mortgaged property). By following the tips below, you can make sure this process is as fast and as painless as possible.

Before You Agree to Buy

1. Sort Out Your Deposit.
Making sure that you have the required funds for a deposit (usually around 10% of the total value is as easy as it is vital. A larger deposit is preferable, as this will reduce the amount you pay in interest over the course of the mortgage.
Having concrete proof that you have the requisite funds to purchase the property is a necessary part of applying for finance and convincing the vendor that your offer represents a serious proposition. Have this proof ready for any occasion you might need it.

2. Check your Credit Score.
Checking your personal credit score can be fast and free. Services such as Experian or Equifax will give you a score, which represents their confidence in you as a borrower. Lenders will pay close attention to this score when considering your application, so knowing in advance will help inform how you approach getting finance.

3. Get quotes from solicitors.
When the time comes for the process of ‘searches’ to be undertaken, you want to already know
who to contact. Interlet recommends getting fixed fee quotes rather than contracting on a percentage commission basis – this can save you a fortune in fees.

4. Get pre-approval for finance on the property.
Banks and other lenders often offer pre-approval processes that will help reduce the time it takes for the mortgage application to be completed. This pre-approval document essentially states ceteris paribus which finance product you qualify for.
This can be a very involved process, mirroring in many ways a full mortgage application. Therefore, make sure that before you being you have prepared:

  • A full set of current personal details, including valid ID
  • A summary of your current assets and liabilities (other property you own, debts you owe etc.)
  • A full set of tax returns
  • Comprehensive details of your current employment and employment history.

5. Use a Mortgage Broker – Particularly if you are a 1sttime buyer.
Mortgage brokers will help you prepare the above, but they will also help you get a better deal. Their experience and access to the full market of lenders will help net you a lower interest rate on your mortgage. The savings in the long term would be expected to cover the initial fee for contracting their services, and by checking your application in advance they can help you avoid potentially costly delays.

6. Be Organised in everything you do.
Plan everything in advance- make sure you know what advice you may need and where to get it from. Have your ducks in a row before you even offer - know your financial position inside and out. As detailed above, there are still things that can slow down the process of completing, but you don’t want to be one of them.
An organised mind set will also help you feel in control of the process, and reduce the potential for stress during an exciting yet complicated process.

Time is of the essence if you want to net that tax free allowance - get moving and good luck!


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