JARGON BUSTER "B"
The balance outstanding is the amount you have left on your mortgage or loan. You may also see it written as the outstanding balance. It is the total sum remaining to be paid at the point the sum is calculated.
For example, you may be informed that the balance outstanding on your mortgage as of May 2019 is £239,500. You should receive an annual statement that reveals the remaining balance left to pay at the time the statement was prepared.
If you have online banking, you should be able to log into your account to see the outstanding balance on your mortgage in between statements.
How does the remaining balance change throughout the life of the loan?
This depends on the kind of loan you have. If you opted for an interest only home loan, the capital borrowed would remain the same throughout. You would only be required to pay the interest due each month, while the capital you borrowed would stay the same. Hence why this type of mortgage is now rarely seen. If you do have one, you should arrange to ensure you can pay off the capital by the end of the term.
With a repayment mortgage, your outstanding balance will gradually drop throughout the term of the loan. It drops much more quickly towards the end of the term, by which time most of your monthly payment goes towards the original loan amount rather than the interest it accrues.
Regardless of the sum owed or the interest rate, however, the balance outstanding always refers to the total remaining to be paid off.
This is the rate set each month by the Bank of England.
How is the rate used by banks and building societies?
Banks and building societies use this base rate to set their own interest rates.
They use it as a benchmark to help them calculate the interest to apply to savings products. They also use it to determine how much interest to charge on loans, including personal loans and mortgages.
How often does the base rate change?
It is reviewed every month, but this does not mean the rate changes every month. It may stay unchanged for several months or perhaps even a year or more. The prevailing conditions help determine whether the rate should change, and if it should, whether that change should be upward or downward.
Banks and building societies are not obliged to pass on savings gleaned from a fall in the base rate. However, in practice they usually do pass on at least part of the savings. This helps them to remain competitive in the products they offer to those looking to borrow money, perhaps for a mortgage, for example.
Similarly, they do not need to increase interest rates on savings if the base rate goes up. However, once again it does benefit them to increase the rate if doing so might lead to more people saving with them.
Fixed rate mortgages help protect against potential future rises in the base rate
The Bank of England often gives clues as to whether it is likely to raise the base rate in the coming months. You cannot fully rely on this, but many people like to opt for a fixed rate mortgage (slightly higher than a variable rate one) as it protects against future rises that may occur. Fixing for two, three, five, or even 10 years provides protection against such rises.
Every good tenancy agreement agreed over a fixed term should include a break clause. As the name suggests, it allows either the tenant or the landlord (or both, depending on the circumstances) to break the agreement before the term is complete.
This means that while a fixed term may last for 12 months, both parties reserve the right to terminate it before that time is up if they have good reason to do so. There is typically a set process that must be adhered to for the break clause to be used in a valid manner in this scenario.
Understanding the wording of a break clause in a tenancy agreement
It is worth knowing that while a break clause sounds singular, it is merely a description of a clause that can appear within a tenancy agreement. As such, there could be different versions of it according to the terms of a specific agreement.
You will usually see several sections on the agreement relating to a break clause. The best example is for one section of the clause to be described from the landlord’s point of view and for another to be described from the tenant’s point of view.
It is common for the tenant to be required to give a shorter period of notice than that of the landlord, although there may not be too much difference between the two. For example, a landlord should legally provide a minimum of two months’ notice. Conversely, the tenant is required to give a minimum of one month.
The break clause should also include any conditions that must be met in full for the clause to be used. If such conditions are not met, the clause would not be triggered and the relevant party could be deemed to have violated the tenancy agreement (whether that is the landlord or the tenant).
A bridging loan (alternatively called bridging finance) provides essential funds to help a buyer purchase a new property before their current one has sold.
It takes its name from the idea that the buyer can bridge the gap between buying and selling. While most existing homeowners would aim to line up the sale of their property to tie in with the purchase of their next one, this does not always happen as smoothly as it should.
The loan is designed to work over the short term. It therefore has a higher rate of interest than a regular mortgage, even though both are designed to help you buy a property. It is vital to understand the difference between them, and to make sure you fully understand the terms of a bridging loan before you take it out.
In what circumstances might someone think about this loan?
Here are some examples of why people may consider bridging finance:
People may have a buyer for their property and not be able to find something suitable to move into People may have found the perfect property to buy but cannot find a buyer for their current home People may be moving far away from their current home and may find it easier to buy something with the aid of a bridging loan before selling their current property
A bridging loan is temporary – and it can be pricey
While rates vary, they can be expensive and are charged monthly. The market is competitive at the time of writing, so these loans are cheaper than they have been in the past. However, you should weigh up costs carefully to ensure you know where you stand. If you end up holding the loan for longer than you intend to, it could well be far costlier than you originally thought. Always check the terms and make sure it is the right product for your needs. Take professional advice and look at all your options before selecting bridging finance.
Building regulations cover all new builds in the UK. Each new build must adhere to the regulations for it to be deemed safe to use. They cover numerous health and safety issues and requirements.
If a new build property did not meet current building regulations, a completion certificate would not be granted on it. This means the property could not be put up for sale until such time as the contraventions to the regulations were dealt with.
The regulations do not merely cover new build properties, though. They also cover work done to existing properties, such as extensions and renovations. These works should also be done in accordance with the existing regulations, to ensure they are of the highest standards and pose no danger to those using the property.
Who is responsible for complying with the regulations?
In the case of a property that is being built from scratch, the owner of the land and the person (or company) dealing with the build has responsibility. So, in the case of a homebuilder developing a plot of eight properties, for example, that homebuilder has responsibility for ensuring they comply with all the requirements.
In the case of an existing property owner looking to build an extension on their property, the builders they select to do the work will be responsible for making sure their work meets the required standards.
If you are considering purchasing a new build, you should be able to confirm that the property meets all the building regulations and that the completion certificate has been issued. This will be required for a building society or bank to agree to lend you the money to buy the property.
A building society is a mutual institution owned by its investors and borrowers. It provides a selection of savings products and mortgages. The similarity of the product range between a building society and a bank means some people are unaware of the differences between them. Some may assume the only difference is in the name.
However, the clue to how different they are is in the description above – mutual institution. A bank is a business. If you were to invest in that business by purchasing shares, you would benefit by receiving dividends. Being an account holder at a bank does not entitle you to shares.
However, a building society is owned by its members and is not a business. If you open an account to save money with a building society, you become a member of that society.
Are you better off seeking a home loan from a building society?
As always, our advice is to evaluate different deals to see which ones are best. Different mortgages last for different lengths of time. Some have fees involved. Some have more competitive rates than others. Comparisons are the most important feature of sourcing the right mortgage for you.
However, building societies do tend to have preferential rates for savers, and there is a chance that borrowers might benefit from better rates too. One thing to be aware of is that building societies are often located in specific areas, i.e. Coventry Building Society and Yorkshire Building Society. However, that does not mean you must be based in that area to use their services – especially with internet access.
Therefore, considering a potential home advance from a building society located elsewhere in the country opens the way to other deals you may not otherwise have found.
Buildings insurance is the most important insurance you could have on your home. It covers loss and/or damage to the physical structure of your home, rather than to its contents. Those would be separately covered by contents insurance.
Many people make the mistake of taking out too much buildings insurance by getting an amount of cover equal to the cost of purchasing their property. This means the policy will be more expensive than it needs to be. The value placed on your building insurance should be less than the value of your home. The important value is the rebuild cost rather than the purchase price.
A simple way to think of the items covered by buildings insurance is to think of everything you couldn’t easily take out of your home if you cleared it out. You couldn’t easily remove doors and windows, so those are covered by your building insurance. The same goes for bathroom fixtures and fittings such as baths, the sink, and the taps. Kitchen cabinets are covered too, but carpets throughout your home generally are not covered. However, do read the terms of any policy you are thinking of getting, just to make sure you understand what is covered and what is not.
If you get insurance online, you will usually be guided through the application process by answering a series of questions about your property. Take your time to get down the answers as accurately as possible. This helps ensure you get the right amount of cover for the best possible price.