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Chapmans Mortgage Services in Collaboration with McKendry Dunion...
Introducing McKendry Dunion: Your Trusted Mortgage Solution in Edinburgh
At Chapmans, we are thrilled to announce our partnership with McKendry Dunion, a leading Mortgage Service Provider in Edinburgh. Our Landlords and Tenants fed back that they would like more information about mortgages; we listened and have teamed up with another 5-star business to bring this to you. Whether you are a Landlord looking to remortgage or extend your property portfolio or a Tenant wishing to make the next move up the property ladder, McKendry Dunion’s extensive industry expertise and dedication within their team of Mortgage and Financial Advisers are committed to finding you the perfect mortgage.
Their impressive track record speaks for itself, as 100% of their clients highly recommend them and would choose them again for their next mortgage. Whether you’re a buy-to-let investor, a first-time buyer, a home mover, or in need of a remortgage, McKendry Dunion has got you covered.
Discover the right category for you below and start your journey towards securing the ideal mortgage.
Buy to Let Mortgages
Buy to Let mortgages in the UK serve as an excellent opportunity for individuals or companies aiming to invest in properties they won’t personally reside in. These mortgages are specifically designed for rental purposes, providing a means to generate a steady income stream.
When opting for a Buy to Let mortgage, it’s important to note that the requirements for deposits and affordability checks differ from traditional mortgages. Lenders will assess your credit file to evaluate your payment history and financial responsibility.
It’s worth considering that First Time Buyers who have never had credit before may face challenges, as they are unable to demonstrate their ability to handle credit responsibly due to extensive saving efforts.
Additionally, the applicant’s age plays a role in determining the mortgage duration. These key factors are taken into consideration when securing a Buy to Let mortgage in the UK.
To listen to their fabulous podcast on all things Buy to Let mortgages, see below…
Buy to Let FAQ's
It’s designed for you to buy a property that you don’t intend to live in yourself. You’ll find there are different deposit requirements and lenders usually use the rental figure to assess affordability, rather than your own income. A lot of lenders will require that you can demonstrate a minimum income.
It depends on the provider and there are a lot of different options and ways you can structure it. For example, an interest only mortgage is a straightforward choice with a Buy to Let mortgage, whereas with residential mortgages you usually have to qualify to get an interest only product.
A personal Buy to Let is a property with a mortgage registered to an individual, or jointly as a couple. The property is owned by you and the mortgage is in your own name.
Limited company Buy to Let has become more popular recently, where you have a limited company which is a separate legal entity. While you own the limited company, the company in turn owns the property and mortgage.
Often what’s required with a limited company mortgage is to give a director’s guarantee for the finance. So if you default on the mortgage payments they can pursue you individually. With a personal Buy to Let mortgage they can always pursue you individually. Like a residential mortgage, if you don’t pay they can seek to repossess the property.
You still have that risk factor with a limited company Buy to Let, but legally you don’t own that property. It can be advantageous for tax purposes.
Theoretically, anyone can get a Buy to Let mortgage. However, it’s become much more common for lenders to want you to own your own residential property.
They would raise the question that if you were looking to buy property as a Buy to Let, why wouldn’t you want to own your own property to live in? Most lenders will want you to be a homeowner in the UK.
The vast majority of lenders will require a 25% deposit. A couple of lenders will accept a 20% deposit. However, you also have to meet their affordability assessment which is based on a complicated calculation.
These calculations use the rental value of the property. Each lender has their own way of assessing that. They also will take into account the individual’s tax position, so if you’re a higher rate taxpayer you will likely be able to borrow less, because more of the rent will be taxable. Therefore, the income you’re getting from the property will be reduced in real terms.
They will also potentially factor in your credit profile within their calculation as well. So although you might have a 25% deposit, if the rent is too low on that property they might require a 30% or a 40% deposit.
Because these calculations can be quite tricky, it’s well worth having a conversation with an advisor. Some lenders offer something called ‘top slicing’ where if the rent calculation doesn’t stack up, the lender will allow you to borrow more if your income supports it.
Again, these involve complicated calculations, so get an advisor to help you navigate through it.
The actual purchase of the property is no different from any other purchase. You make an offer on the property and that will be the price you pay. Obviously, investors don’t want to overpay for the property so they’re looking for good deals where they can.
You will have the usual costs, such as for a solicitor to carry out the transaction, and you might have advisor fees. You will have tax to pay: depending on the property price there may be ‘land and buildings transaction tax’ (LBTT), which used to be called stamp duty.
Because that doesn’t roll off the tongue, a lot of people still refer to it as stamp duty. But that ends up confusing everybody – people think there are two taxes. But it’s just LBTT.
That’s assessed on how much you pay for the property. If you’re buying a Buy to Let property, you almost certainly own your own residential property, which means you will be liable for additional dwelling tax. That’s irrelevant of how much you pay and will always apply. Currently, in Scotland that’s 6%. So, if you buy a property at £100,000, you’ll pay £6,000 in tax. That rate is up for review regularly so could easily increase or decrease.
Really, that additional dwelling tax is the only cost when buying a Buy to Let property – the rest of it’s as you would expect for any purchase.
Once you own that property, there are a lot of health and safety requirements to consider as a landlord. You should consult with a letting agent to find out exactly what your legal responsibilities are. That can be quite costly if the property has never been let before, so that’s an important thing to consider.
It’s not exactly illegal, but theoretically, it’s a breach of your mortgage conditions to live in your Buy to Let property.
Sometimes we’ll have people who have bought property and would incur early repayment charges if they wanted to restructure their finances. But they get moved away for work. In those scenarios, they can approach their existing lender and ask for Consent to Let. That’s asking the lender for permission to let out the property for a period of time.
It will be up to the lender if they’re prepared to do that. If they make any charges that’s entirely discretionary. With Consent to Let, although you’ve got a residential mortgage on the property, you can go ahead and rent it out.
In terms of living in your own Buy to Let property, that’s not what it’s designed to do. If you take that mortgage out on day one and you move in on day two, that would be deemed mortgage fraud.
However, if you have a Buy to Let and you want and you want to move into it, you could try and move it onto a residential mortgage.
You can choose either option. There are no qualifying criteria for that with most lenders. What you do will depend on your exit strategy and whether you ever want to own the property outright. Your tax situation is also relevant.
Anybody who’s looking to invest in property is well advised to speak to an accountant to discuss the impact of tax. Some prefer to keep as much of their income aside as possible to cover their tax bill. Then they might seek to pay down some of the mortgage with overpayments.
It will come down to a choice of whether you ultimately want to own the property outright and whether it’s the right thing to do tax-wise.
There isn’t necessarily a limit, but some lenders have one and this does change. A lender might not want to be exposed to any one landlord beyond a certain amount of money or a certain number of properties.
Those limits do tend to be quite big. If somebody just wants one or two rental properties that’s usually fine. But if somebody’s got 10 properties in their portfolio, a lender might not want to provide mortgages for more than five of them.
If you own more than four Buy to Let properties, you’re classed as a portfolio landlord in the eyes of most lenders. There are different criteria for assessing portfolio landlords, as the risk factors change.
I tend to think you’re better to either keep under the four and be a small landlord. If you’re planning to be a portfolio landlord you will need a lot of properties to make it worth your while.
In this area, more than any other, it’s essential to have an advisor who really gets to know you, your objectives and your goals.
Buy to Let has become a lot more criteria-based. Previously, it was very straightforward – if you had the right level of deposit it was simple. There are now lots of different calculations to factor in, and lots of different ways you can structure the finance. So it really is beneficial to have an advisor on your team.
First-time Buyer Mortgages
When it comes to First Time Buyer mortgages, the requirements are pretty similar to those for any other mortgage. The lender will focus on your level of affordability, which includes your income, its source, reliability, and amount. They will also consider your expenses, such as dependents and credit commitments, including credit cards, loans, and even car finance.
Additionally, your credit file will be reviewed to assess your payment history and overall creditworthiness. It’s worth mentioning that for First Time Buyers who have not established credit due to prioritising savings, this can sometimes work against them, as they are unable to demonstrate responsible credit management.
The applicant’s age may also influence the duration for which the mortgage will be offered. These are the key factors taken into consideration for First Time Buyer mortgages.
To listen to McKendry Dunion’s fantastic podcast on First Time Buyers’ mortgages at your leisure, see below…
First Time Buyer FAQ's
To be honest, there’s not a lot of difference in the requirements for a First Time Buyer mortgage as for anyone else. The same principles apply. The lender will be interested in your level of affordability – that’s your income, where it comes from, how reliable it is and how much you receive.
They’ll also be interested in your outgoings – the people that rely on you like children or adult dependents, plus your credit commitments like credit cards and loans. Importantly, because everyone forgets this, car finance will be taken into consideration.
Lenders will also look at your credit file, to see if you’ve missed payments before or if you’ve got a good track record. Sometimes if First Time Buyers have never had credit because they’ve been too busy saving, that can almost go against them – they can’t demonstrate that they can handle credit responsibly.
The age of the applicant will also be a factor in how long they will lend the mortgage for. Those are the main things that will be taken into consideration.
That will depend on the individual circumstances. Mortgages are granted on what the lender deems affordable for the client, not what the client thinks. I quite often speak to people who are paying X amount in rent and the mortgage is going to be cheaper, and they ask why they can’t borrow more. It’s a good question, but unfortunately, it doesn’t work like that.
It will come down to your individual circumstances, and that assessment’s always worth doing with a broker. Each lender has its own calculation of affordability, so the maximum you can borrow can vary quite a bit from lender to lender. If you’re looking for the maximum possible mortgage, a broker can help make sure that you get that.
Generally, you need at least a 5% deposit. At the moment one product is available at 100%, which means you wouldn’t need any deposit in cash, although you would still need to pay your fees [podcast recorded in August 2023]. It’s for a very specific set of circumstances, so it wouldn’t suit everybody.
In Scotland, that 5% deposit is of the purchase price or the valuation – whichever is lower. So if you’ve got a property that’s valued at £100,000 and you have to bid £105,000 to buy it, the minimum cash deposit you would need is £10,000. It’s 5% of the £100k, then the £5,000 over and above is not included. The deposit is not 5% of what you pay for the property.
Interest rates are much the same for everybody. Depending on where the market is, sometimes lenders will offer favourable rates to First Time Buyers to try and win their business.
There’s a range of different products you can have, but the difference between a First Time Buyer mortgage and a mortgage for anybody else is almost imperceptible most of the time.
With a fixed rate mortgage the interest rate is set in stone for a period of time. That’s great if you want to have certainty in your budget – you’ll know what you’re going to pay whilst you’re in that initial window.
If you see Bank of England base rates going up, it doesn’t affect you while you’re in the initial window. If they come down, it doesn’t benefit you, of course. A lot of First Time Buyers are very keen on fixed rate deals – they’re getting used to budgeting and running a house, so it gives them a degree of certainty about their budget.
Variable interest rates haven’t been popular recently, because they’ve not been particularly beneficial. With a variable rate mortgage, depending on the product, your interest rate can change. It might move in line with the Bank of England base rate – so if that goes up, your mortgage payment will go up. If it comes down, your mortgage payment will come down.
If there’s a lot of uncertainty in the market, like there is now, that’s probably not beneficial for people. You do tend to find that variable products can be a little bit higher. But critically, variable interest rates there tend to have less early repayment charges.
If you’re on a fixed rate product and you wanted to sell the property and pay off the mortgage, you can do that, but there’d be a financial penalty called an early repayment charge. Often a variable rate deal doesn’t have that. So if you want to sell the property within a relatively short period of time, that flexibility might be the right thing for you.
That will depend on the individual circumstances. Mortgages are granted on what the lender deems affordable for the client, not what the client thinks. I quite often speak to people who are paying X amount in rent and the mortgage is going to be cheaper, and they ask why they can’t borrow more. It’s a good question, but unfortunately, it doesn’t work like that.
It will come down to your individual circumstances, and that assessment’s always worth doing with a broker. Each lender has its own calculation of affordability, so the maximum you can borrow can vary quite a bit from lender to lender. If you’re looking for the maximum possible mortgage, a broker can help make sure that you get that.
Not as many as there were, sadly. Although in Scotland there’s the government’s Lift Scheme – it’s a form of shared equity, which could be very beneficial for First Time Buyers who maybe don’t have a big deposit or a large income. That’s available, but there’s not very much else at the moment.
Lenders will want ID – so a passport or driving licence. They’ll want proof of address, which can also come from your driving licence – assuming you’ve got the right address on it – or a utility bill. If First Time Buyers are still at home with parents, sometimes they don’t have that, so your licence can be useful.
Lenders usually want to see three months’ bank statements with your salary going in, and three months payslips. We’ll also need evidence of where your deposit is coming from.
I did have a client once who was very concerned about identity theft. The moment they got their payslip, they shredded it. But of course, from a mortgage perspective, it was a nightmare. They had to request the payslips from their employer and it took weeks… So this is a time to be accumulating those documents – not shredding them.
The first thing to do is to speak to somebody like myself to get an idea of your affordability and your budget. As part of that, we would get what’s known as a Decision in Principle. That’s as much of a mortgage guarantee you can get without actually having an offer accepted.
When you get a mortgage, it is based partly on you, your affordability and your credit worthiness and partly on the property being suitable security for the lender. We can only get so far until you’ve actually had an offer accepted.
So job number one is to make sure you can get accepted for a mortgage and know what you might be able to afford. Then you can go off and look for houses, which is the fun bit. Once you’ve got an offer approved, a solicitor will usually help you with that and we quite often will chat that process through with clients. People can use us as a sounding board.
Once the offer is accepted that’s when things get really frantic. We need all the documents and we’ll speak at length about specific mortgage products and submit the application.
Obviously, don’t shred all of your documents! One other thing to highlight is that sometimes, First Time Buyers have moved around quite a lot. If you’ve lived in a few temporary rental properties, having your address history as accurate as possible on your documents is really helpful.
Sme clients come in and their driving licence has one address, their bank statement has another, their payslip is different again, and although there might not be anything necessarily wrong with that, it can be a red flag to the lender. They will then ask further questions, so be mindful to keep everything at the same address.
When you set up your mortgage, the lender will set up a direct debit for you and take the payment from your bank account. If they go to take the payment and you don’t have sufficient funds there, or you have cancelled the direct debit by mistake, the most important thing is to act quickly.
So if it’s an admin error, because you’ve deleted the direct debit, get in touch with them immediately and make the payment. If you’re having difficulty affording the payment, phone them. Every lender has a dedicated department to chat with you about that.
They’re obliged to help you stay in your home so they’ll very often set up payment plans or discuss your situation and how you can get back on track. If you are talking to them, they will be quite happy. If you just don’t speak to them and you’ve missed that payment, that’s when it can start to impact your credit score. But if it’s just within the month, you’ve paid it and it’s all resolved, it’s unlikely to hit your credit report.
Yes, is the quick answer. But it really depends on your circumstances. If you’ve very recently been declared bankrupt, you’re probably unlikely to be accepted. If you’ve just had some issues with credit in the past, there are certainly lenders with a more relaxed attitude.
It also depends on the issue. For example, if it’s a mobile phone contract where you’ve missed a payment, lenders tend to be quite relaxed about that. If it’s a bigger credit card or a loan, that’s more of a problem, but time is a great healer with these things. The longer it’s been since you had any kind of credit issue, the more likely you are to be accepted.
Some lenders specialise in this kind of field – but you might be required to put in a bigger deposit to get approved. If you have any kind of credit issues, speak to a broker like myself. We can look at your credit report with you and work out where you would fit in with the adverse lenders. I’ve certainly had clients where if they waited just another month they could be approved. We’ve waited patiently for their credit file to be updated, and then gone ahead.
In Scotland we now have what is known as land and buildings transaction tax (LBTT). It replaced stamp duty and so everyone calls it stamp duty – which is very confusing, particularly for First Time Buyers. They might think they’re being taxed twice, but it’s just one cost.
The LBTT could kick in, depending on the purchase price. At the moment [podcast recorded in August 2023], there is a form of First Time Buyer Relief. It means you can pay more for the property before you’ll incur any LBTT cost.
If you’re buying a really quite an expensive property it will be payable, but it’s on a sliding scale. We would explain all that as part of our initial consultation. We would have an idea of your property budget and would discuss whether LBTT would be a factor to consider.
Remortgages
The term remortgaging usually means reviewing the arrangements of somebody who already has a mortgage in place. For lots of different reasons, we might choose to move the mortgage to another lender. The other option is a product transfer, where you take a new product with your existing lender.
To listen to McKendry Dunion’s fantastic podcast on Remortgages at your leisure, see below…
FAQs...
We always recommend that clients start looking at the options when nearing the end of a product. Most people will be on a fixed rate or a tracker deal for a period of time – typically two, three or five years.
When that arrangement comes to an end, if people do nothing they go on to the lender’s variable rate. That may or may not be the right thing to do. We recommend not blindly going onto that variable rate, and instead having a conversation about the options.
We’ll look at your circumstances and present some choices. You might qualify for a better rate if your home’s gone up in value, or if interest rates have dropped since you initially took on the mortgage.
It might be that you want to avoid going on the variable rate, as it might be quite a bit higher. On a variable rate, if interest rates change you’ll have a lot of fluctuation in your monthly repayment – most people prefer to avoid this.
It’s also a very good time to review the amount of money that you have outstanding on your mortgage. Perhaps you’ve had a lump sum of cash or a bonus – you might want to consider making a large payment on the loan.
Some people consider remortgaging because they want to borrow more money. That could be for a wide range of things – home improvements like adding an extension or a new kitchen, or perhaps to consolidate debts.
There’s lots to consider about a debt consolidation mortgage so it’s worth speaking to an advisor. It’s not something you should do lightly. But it is something that people might consider at remortgaging time.
If you are currently in a product you’ll often have an early repayment charge. It means that while you can absolutely pay off the mortgage or move to another lender, your existing lender will charge you a fee, and sometimes that can be quite high.
Even though there might be a better rate on the market, when you factor in the early repayment charge, it’s not worthwhile switching. That’s something an advisor can help you with – to assess the costs.
Another thing that’s quite common is that a client has become self-employed and can no longer demonstrate their income in a way that a lender would accept. At this point remortgaging to another provider is unlikely to be an option, although it’s still always worth checking with your advisor.
At McKendry Dunion Financial we like to be mortgage advisors for the lifetime of our clients’ mortgages. We want you to check in with us and have that conversation. Whilst it might not be possible to move to a different lender, there’s usually something we can look at with your existing lender if a product is due to end.
There are some circumstances where we might not be able to do very much. If you’ve got very little equity in your property, or if you’ve had credit problems, for example. It’s quite common at this moment in time [podcast recorded in August 2023], for clients to be on wonderfully low rates because they took their mortgage out in a low interest rate economy.
The rates available in the market just now are just not comparable. We would never recommend that somebody move from a low rate to high rate if they can avoid it.
It does depend on the terms and conditions of your mortgage product and your advisor should have made that quite clear at the outset. For the majority of mortgages, once your introductory rate comes to an end on a specific date, you go onto the lender’s standard variable rate.
Being variable, that rate moves – lenders have the ability to set it at whatever they want. At the moment we’re seeing variable rates that are a lot higher than the available fixed rate deals.
So if you don’t do anything, you can find your mortgage payment goes up quite a bit. You’re also quite vulnerable because the rate can go up and down.
However, if a client’s actively looking to sell their property, they might well want to endure the variable rate to avoid any early repayment charges. If it’s only for a couple of months while they’re waiting for the sale to go through, that might be the right solution. Really, it’s best to get some advice at that point.
It’s much the same as getting any mortgage. It helps massively if you’ve looked after your credit score and made sure that everything is up to date. Being able to demonstrate a good income is helpful, and the more equity you’ve got in your house, the more chance you have of qualifying for the better rates on the market.
Again, it depends on your circumstances. Quite often if we’re going for a product transfer, staying with your current lender, there are no charges associated with that.
You might find that there will be a charge from the lender that would qualify you to get a lower interest rate. Again, your advisor can help you work out whether that’s worthwhile or whether you’re better to go for a product without a charge.
If you’re moving to a new lender, there will often be a fee. The lender will want to do a valuation of your property and there is a legal transaction in moving from one lender to another – but it’s very common for the lender to cover those costs.
Again, it’s worth speaking to an advisor to work out if those incentives are the right thing for you and or whether you could get a better deal without them.
It’s vital to have a conversation about your specific circumstances so that we can compare all the options. We will look at what’s being offered by your existing lender and the wider market, as well as explore your plans for the future.
We can marry everything together and have an informed conversation. Our advisors can pull all that information together for you very quickly and knowledgeably. That then allows you to reflect and decide what’s the best option for you.
Think carefully before securing other debts against your home.
Contact McKendry Dunion Financial today...
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Your home may be repossessed if you do not keep up with your mortgage repayments.
Think carefully before securing other debts against your home.
McKendry Dunion Financial Limited is an appointed representative of Quilter Financial Services Limited which are authorised and regulated by the Financial Conduct Authority.
