It’s possible to apply for a mortgage “Agreement in Principle”, which states what a lender is likely to lend you based on some information online or over the phone in a couple of hours. It involves you providing some basic information about your finances and a credit check, but it’s not a 100% guarantee you’ll get the full mortgage until all the paperwork has been done at a later stage. Indeed, it’s worth remembering that the lender’s rates could change over the two to three months for which it’s valid.
It does however show vendors that you’re serious and ready to go.
In terms of securing a mortgage offer, there’s no hard and fast rule over the time it takes, but most of us can expect to wait around a month (between 18-40 days) from application to mortgage offer – provided the process goes smoothly and your application is relatively straight forward.
A standard variable rate mortgage (also known as an SVR or reversion rate mortgage) is a type of variable rate mortgage. The SVR is a lender’s ‘default’ rate – without any limited-term deals or discounts attached.
When a fixed, tracker or discount mortgage deal comes to an end, you will usually be transferred automatically onto your lender’s SVR.
It can be risky to stay on your lender’s standard variable rate mortgage. A lender can raise or lower its SVR at any time – and as a borrower you have no control over what happens to it. Standard variable rates tend to be influenced by changes in the level of the Bank of England’s base rate. However, a lender may also decide to change its SVR while the base rate remains unchanged.
If you are on a tight budget and relying on your SVR to remain low, you’re in a very vulnerable position. In this case, it is very important you try to remortgage onto a fixed rate deal (which offers rate stability) before it’s too late.
It’s impossible to predict with any certainty when interest rates will rise again – there are no hard or fast rules about when exactly it will happen.
The most important thing for borrowers is to be sure that if you’re on a tracker, discount or other variable rate mortgage – you could still afford your repayments if rates went up by 2%. Although it’s unlikely that rates would rise by 2% in a short period, it’s not impossible.
On Black Wednesday back in 1992, the Chancellor raised interest rates by 2% in one day, and a further 3% shortly thereafter. Although this was an extreme event, it goes to show that movements in interest rates can be unpredictable.
Refer to our interest rate calculator which will help indicate what interest rate a new mortgage would need to save you money.
Each person’s let to buy arrangement will work slightly differently but broadly it works like this:
Stage 1: Remortgage your current property onto a new mortgage deal. You could do this with your existing lender or a new lender. If you own enough equity in the property remortgaging will allow you to release some money.
Stage 2: The new mortgage will either need to be a buy to let mortgage or you will need to agree consent to let with the lender, which allows you to rent your property out but not to remortgage. Be aware that some lenders will increase their interest rate or charge an admin fee in order to grant consent. You would then let out your existing property to cover your mortgage repayments.
Stage 3: Use the equity you have released or existing savings as a deposit to take out a new mortgage and move into a new home.
Stage 4: Keep letting your existing property until you would like to sell it.