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Mortgage Banking

Mortgage Tips

Where should I start looking for a home? Should I buy or should I build?

This is the most difficult decision that one must make when acquiring a new home. The process of locating or building a suitable home is not usually a decision that is taken quickly. The first thing you need to know is how much money you can afford to pay for a house.

Some useful tips on buying a home:

  • Decide beforehand in which area you want to live and concentrate your efforts on that area;
  • Contact Real Estate agents or Real Estate Promoters and advise them of the amount you can spend on a property and the area in which you would like to live
  • Refer to newspaper advertisements;
  • Visit Abbey Mortgage Bank Plc links to property developers and properties offered;
  • Let people know that you are in the market for a home.

The house that you purchase should take into consideration:

  • The size of the land you desire;
  • Number of bedrooms for your family;
  • Additional amenities required – Family/T.V. room etc.;
  • Desirable neighborhood;
  • Close proximity to transportation, schools, shopping and other services;
  • Availability and reliability of utilities;
  • Security.

Tips on viewing a prospective home:

Examine the house carefully for:

  • Leaking roofs – i.e. water stained ceilings;
  • Visible cracks/repaired cracks…. especially wall joints;
  • Moisture damage on walls/floors;
  • Shifting foundations – exterior cracks should be carefully examined by a construction professional;
  • Leaning walls;
  • Termite eaten woodwork/droppings;
  • Deteriorating floors;
  • Dilapidated cupboards;
  • Damaged plumbing, e.g. flush all toilets, turn on/off all faucets etc.;
  • Worn or exposed electrical wiring – turn on all electrical outlets and motors;
  • Land slippage.

All of the above will provide you with an idea of the condition of the house and therefore, enable you to contact repair specialists with a view to determining the costs you will incur to rectify those problems. That, of course, will determine the price you pay for the house.

Tips on Building a Home:

  • Seek advice from architects, quantity surveyors, surveyors, real estate agents, land developers and town planners.;
  • Inquire about the services of several reputable contractors or builders before deciding on one;
  • Make personal checks on costs for verification of estimates received;
  • Try to fulfill your immediate needs and do not over-extend yourself financially;
  • Plan ahead what your family needs are and construct a home that fulfills those needs or is capable of being expanded/modified;
  • Build a home that suits your family’s lifestyle. For example, if you have children or are planning on a family, play-space must be accommodated;
  • Avoid making alterations to the proposed building during construction. This practice may lead to additional costs not catered for in the estimates;
  • Look around for properties that you like and inquire about the designer and builder;
  • Sound financial management and discipline is very important in order to avoid cost overruns. Once you have decided on material specifications, keep to your plans.

Buying an Existing Home

Once you have located a home which you would like to purchase:

  • When making an offer to purchase, with deposit, please ensure that it is conditional on securing adequate mortgage financing. Any agreement signed should incorporate this feature if you require mortgage finance to complete the transaction;
  • Get tentative approval for your mortgage financing before making a down payment on the property;
  • The seller must provide you with a copy of the proper deed for the property;
  • Have an independent search done on the property to determine that it is free from all encumbrances;
  • Have a lawyer prepare a purchase agreement between yourself and the vendor and have it properly signed and duly stamped;
  • The purchase agreement states the price, down payment amount and terms and conditions regarding final settlement of the purchase transaction;
  • The purchase agreement usually gives you ninety (90) days from the date of down payment in which to settle the mortgage details. Therefore, you can now proceed to Abbey Mortgage Bank Plc to apply for your mortgage. Under the terms of the purchase agreement, once you make your down payment, the seller of the property must assign the insurance coverage on the property to you.

Advice on Buy-to-Let Mortgages

When you decide to buy property for investment purposes with a buy-to-let mortgage, you should not assume that you will always secure tenants for your house.  There could be long periods of 6 to 12 months when the property could be unoccupied.

Again, as the landlord you may have to undertake significant repairs from time to time at the request of your tenants.  Mortgage payments will however be due and payable irrespective of the revenue flow you may or may not be receiving at the time.

It is therefore prudent to build a reserve equivalent to 6 to 12 months of mortgage payments to ensure that you can meet your obligations during periods of financial difficulties.

Now That I Have Negotiated My Mortgage – What Do I Need to Finalize The Transaction?

You have negotiated a mortgage that best suits your needs at the most favorable terms and conditions. The following will occur to complete the mortgage transaction:

  1. Offer Letter

    Abbey Mortgage Bank Plc will consider your application and will provide you with a letter of approval by way of an Offer Letter. This letter outlines the sum of money which will be granted to you under a mortgage agreement and it stipulates the terms and conditions of the mortgage.

    You will be asked to sign the Offer Letter having agreed to the terms and conditions. Offer Letters are fairly standard in its content. The only significant differences that will affect your decision-making are the terms and conditions relating to late payment of monthly installments and any penalties applied for early repayment of the mortgage.

  2. Upon submission of the signed commitment letter you will be legally bound to draw down on the mortgage and interest begins to accumulate.

  3. Fire Insurance Policy

    Once the mortgage is approved, you will be required to obtain comprehensive all risk insurance coverage on the property purchased or built for the amount recommended by the surveyor. The insurance has to be effected just prior to completion of the mortgage agreement.

  4. Legal Requirements

    Abbey Mortgage Bank Plc will advise our lawyer that a mortgage has been approved in your name for the purchase of your prospective home. We will instruct the lawyer to carry out the necessary searches and prepare the necessary documentation to complete the mortgage transaction.

    • Searches – The lawyer will carry out a search at the Land Registry to determine that your prospective home is free from all encumbrances, i.e. that the property has good and transferable title. These can be obtained from the person from whom you are buying or, depending on the terms and conditions of your purchase agreement, you may have to pay the outstanding amounts.
    • Preparation of Legal Documents – Once they determine that the property is transferable, the lawyer will prepare the necessary legal documentation.
    • A Deed of Conveyance is prepared transferring ownership from the previous owner of the property to the prospective applicant. Also, a Deed of Mortgage is prepared which is the agreement between you and Abbey Mortgage Bank Plc detailing the terms and conditions of the mortgage. The Deed of Conveyance will have to be signed by you and the seller in the presence of a lawyer.  In addition, you should sign the Deed of Mortgage.

      The funds will then be disbursed in the manner indicated below. This is referred to as the Execution of the Legal Documentation. Once the execution is completed, the mortgage transaction is effectively closed and your mortgage agreement with Abbey Mortgage Bank Plc is then in place.

      The lawyer will then register the two legal documents and pay the necessary duties. Once the registration is complete, you will be provided with completed copies of the documents for your records.

Now that you have Closed your Mortgage You Need to Ensure the Following: – Land Registrar:

The lawyer will provide you with a completed Return of Ownership form which you need to record the transfer of ownership in the Land Title Register.

Prompt payment of mortgage installment:  Your mortgage deed stipulates terms and conditions regarding prompt payment of monthly installments. Ensure that your mortgage installment is always paid on time. You will incur additional interest charges for delayed payments.   Under the terms of your mortgage agreement, Abbey Mortgage Bank Plc has the right to foreclose on your home if you allow arrears to build up.

Prompt Payment of Insurance Premiums:  Abbey Mortgage Bank Plc will require you to make prompt payment on Life and Property Insurance premiums on the respective due dates.
Non-payment of these premiums effectively erodes the security that you have provided to Abbey Mortgage Bank Plc and therefore we will strictly monitor these payments.

Mortgage Eligibility

You qualify for a Abbey Mortgage Bank Plc mortgage if you:

  • meet certain eligibility requirements;
  • are financially capable of servicing your mortgage (ideally repayments cannot exceed 33% of borrower’s earnings);
  • are credit worthy with no history of bad debts;
  • can provide adequate security for the loan;

Eligibility:

Prospective borrowers will be assessed for their eligibility to apply for their preferred product:

  • Age:

    Prospective applicants must be at least eighteen years and no more than 65. The maturity of the mortgage should not extend beyond the applicant’s retirement age.

  • Purpose of the Loan:

    The mortgage must be used to either (i) finance the acquisition of a home (ii)or develop or renovate a property.

Financial Ability

  • Income Qualification:

     Applicants must provide proof of their gross monthly income and allowances by way of an employment contract, tax returns, and most recent pay slips. Variable income such as overtime and bonuses are usually not considered as part of gross income. Applicants who are self-employed shall need to provide an income statement prepared by a qualified accountant. This should be supported by historical information on bank accounts to prove the income declared;

  • Income Security:

    Applicants must be able to provide evidence of employment for a period of at least three years. Applicants who are not in formal employment should provide satisfactory evidence of their ability to sustain the declared level of income;

  • Capacity to Service the Loan:

     Applicants should be able to provide complete and accurate information regarding their financial responsibilities and commitments. The applicant’s monthly repayment obligation under the mortgage agreement must not exceed 33% of their gross income. Where the applicant has other existing loans, the combination of mortgage installment plus other loans must not exceed 33% of the gross income;

  • Deposit:

    Prospective home buyers are required to contribute a minimum of between 20% – 30% of the property value. The borrower will be required to provide evidence of this amount at the time of application and deposit it in a designated account before the mortgage facility is disbursed;

  • Credit Worthiness:

     Credit reference checks will be carried out on all credit facilities the applicant may have contracted. Abbey Mortgage Bank Plc must be satisfied that the applicant has a good credit rating before the mortgage is granted.

Quality of Security

  • Tenure:

    The mortgage facility has to be secured by an unencumbered freehold or leasehold property. In the case of leasehold properties, the remaining term of the lease must exceed the maturity date of the mortgage by at least 10 years; 

  • Value of Security:

    A valuation report prepared by a surveyor acceptable to Abbey Mortgage Bank Plc and dated no earlier than six months prior to the application should be submitted. Once a decision has been made to purchase the property, the purchaser should contract the services of an Abbey Mortgage Bank Plc approved surveyor to prepare a Valuation Report of the property on his/her behalf;

  • Duration of the Mortgage:

    Abbey Mortgage Bank Plc maximum duration of the mortgage loan is 10 years. Borrowers may choose to pre-pay their mortgages, an option which may attract a small penalty; 

  • Instrument of Security:

     Most mortgage facilities must be secured by a legal first mortgage on the land and building, life insurance and fire insurance assigned to the Mortgagee;

  • Life Insurance:

    Abbey Mortgage Bank Plc requires life insurance coverage for the duration of the mortgage covering the loan amount. This insurance serves as additional security for Abbey Mortgage Bank Plc but it is also recommended as it provides additional security for mortgagors in the event of death. That is, if the mortgagor should die during the term of the loan, the proceeds of the life policy would be used to pay off the mortgage therefore the family would not be left with the outstanding debt; 

  • Comprehensive Property Insurance Cover:

     The borrower shall be required to maintain a comprehensive all-risk insurance coverage for the replacement value of the mortgaged property. Both life insurance (if required) and comprehensive insurance must be assigned to Abbey Mortgage Bank Plc during the term of the mortgage.