Mortgage advice at a premium

Astaroth

Well, that dreaded day is nearly upon us where it is time to go out into the world of being a property owner.

Whilst I work in financial services world I unfortunately have little to no knowledge or experience on mortgages.

What adds to the complication is that as an employee of a banking group I am entitled to a special discounted rate if I borrow from my employers (currently 4.1% fixed for 2 years or 4.5% fixed for 5 years and both then going to 6.59% variable with no arragenement fee) but I understand that the discounted rate counts as a benefit in kind and I would get taxed on any savings from the rate set by the IR (which I believe is 5%) - I am a higher rate tax payer.

What I ideally would like to do is to speak to an independant person who would not only cover off the products they normally offer but could cross compare it to my employers offering. The obvious problem is that if I go with my employers then they dont get commission - are their people out there who only charge by the hour and get no kick backs so do give truely independant advice?

Joe_Bloggs

Why not do some of your own research and let those of us who are not financial advisers into what you found out. I learned from your post that HMRC sets an 'assumed' interest rate (5% for the last 4 years) as a standard rate to tax cheap loans granted to employees. Alas I dont know how this actual benefit would be taxed, perhaps other do ? How easy is it to remortgage with your employer ? What happens if you resign, are made redundant, get sacked, sue your employer ?
Read and understand the terms and conditions for any mortgage product before you sign up.
J_B.

AndrewSmith

Hi,

To be honest I think if you approached any reputable Mortgage Broker they would be happy to operate on that basis for you.

On the occaisions I have acted in this way for clients I have always drafted a Terms of Engagement agreement signed by both parties before undertaking any work. This is essential as protection for both parties as:

a) Any advisor is usually paid nothing until completion of the mortgage (commission of broker fee)

b) The client is fully aware of what the charges per task / hour will be, and what constitutes a chargeable task.

In this case, if you decided to go with a company that would pay the advisor a commission, I would expect that commission to be returned to you in full (the average commission for a full status mortgage being 0.35% of the loan or £350 per £100,000 loan), as you will be paying the advisor an agreed fee / hourly rate to cover his time anyway.


Hope this helps

Andy

joepubli

b

Astaroth wrote:

Well, that dreaded day is nearly upon us where it is time to go out into the world of being a property owner.

Whilst I work in financial services world I unfortunately have little to no knowledge or experience on mortgages.

What adds to the complication is that as an employee of a banking group I am entitled to a special discounted rate if I borrow from my employers (currently 4.1% fixed for 2 years or 4.5% fixed for 5 years and both then going to 6.59% variable with no arragenement fee) but I understand that the discounted rate counts as a benefit in kind and I would get taxed on any savings from the rate set by the IR (which I believe is 5%) - I am a higher rate tax payer.

What I ideally would like to do is to speak to an independant person who would not only cover off the products they normally offer but could cross compare it to my employers offering. The obvious problem is that if I go with my employers then they dont get commission - are their people out there who only charge by the hour and get no kick backs so do give truely independant advice?

If there are no fees I'd go with the employer's 4.5% for 5 years. Seems a good deal as its at current base rate and the base rate is expected to go up. You'd pay 40% tax on the "saving" - ie 5.00-4.5%= on £500 per £100k. The actual tax would be £200. So if your mortgage is say £250k, tax would be £500 per annum. I think this is still a very good deal. Check what happens if you leave etc. The 2 yr deal is also very good.b

Joe

Astaroth

I have looked into leaving and basically you have to remortgage - there is an amount of time given to do this but it isnt massive. At the moment under my current contract I have a 6 month notice period and so anything other than being sacked would give me that time to sort out the replacement.

The better option would possibly be for my partner (who works for the same company) to take out the mortgage as the "member of staff" as she is a lower rate tax payer (as long as the joint income calculations arent affected by it) therefore saving money on the tax and she is much less likely to be wanting to leave the company in the next 5 years of her own accord than I am - but if redundency occured (highly unlikely at the moment but who knows in the next 5 years) she only has a 1 month notice period so we would need to get things sorted out a lot quicker.

Certainly something to be thinking about.

Many thanks

MortgageMamma

What I ideally would like to do is to speak to an independant person who would not only cover off the products they normally offer but could cross compare it to my employers offering. The obvious problem is that if I go with my employers then they dont get commission - are their people out there who only charge by the hour and get no kick backs so do give truely independant advice?[/QUOTE]

Some commission based advisors are able to give truly independent advice without charging a fee. I'm one of them, and it's called best advice, i.e. you have to show on your files you advised your client to take the best possible option, so I really don't see why you should pay someone a fee when if you approached a reputable advisor they would draw up comparisons and explain them to you for nothing.

Astaroth

MortgageMamma wrote:

a reputable advisor they would draw up comparisons and explain them to you for nothing.

As I said, I a have had little to do with mortgages before and dont know any advisors in my area...

I am certainly not wanting to put dispertions on either your ethics or your industry as a whole but after spending a couple of hours working on something for someone and hyperthetically come down to close contenders one of which you will receive a commission on recommending and the other you will receive nothing... unless I totally trusted the advisor then I would be suspicious that they had recommended the one that they get paid for rather than the one they dont because of their own pocket. The advantage of paying someone is that it does give a piece of mind that they may recommend my staff system as they will still get paid.

MortgageMamma

I see your point re paying someone. Well if you want an impartial comparison, I'm happy to help for free. I'm having a chill week this week before I start a new job, so I assure you I'm really not going to try and flog you owt because I really can't be bothered this week! Just content if I'm saving someone money! I'll send you a screen dump of alternative deals and their terms if you want, but your staff mortgage on the face of it does sound very good. I used to have a staff mortgage in 1997 when I worked for Abbey National, and that was a good deal.