Censeo Financial: Home-buying and mortgage FAQs

Learn about the mortgage process from specialist brokers

Censeo Financial are an award-winning mortgage broker specialising in Shared Ownership and affordable homeownership. Having been trading for over 16 years, we work with many housing associations, councils and developers and have helped thousands of first time buyers get onto the property ladder.

We have access to all lenders who offer Shared Ownership mortgages and often get exclusive deals that you wouldn’t get from going to a lender direct. We strive to offer the best service possible and to find our customers the best mortgage for their personal needs, saving time and money.

What happens if I buy with a small deposit and my property goes down in value?

Property can rise or fall in value. When you buy a home, you will usually buy it with savings for a deposit and the rest through a mortgage.

If your property falls in value below what you paid for it, then this is known as negative equity. This is usually because of economic downturn. Generally, buying property in the UK has long been seen as a safe long-term investment. Since the financial crash in 2008 home values have risen significantly; as their value grows, so does their equity.

The bigger the deposit you put into your property the more equity you have. If you purchase a property with a 5% deposit, then you are potentially at risk of negative equity should house prices fall by more than 5%. In this scenario, your property would actually be worth less than your mortgage.

In the short term, this may not pose a problem. You may have paid some of your mortgage off if you have taken a capital repayment mortgage or you may have made overpayments on your mortgage which most lenders allow you to do (up to 10% of the mortgage balance annually). Alternatively, you may use savings to pay off a portion of your mortgage to bring yourself back into positive equity.

However, significant challenges arise if you need to sell your home or wish to remortgage, as banks and building societies may be unwilling to lend to you or lend based on the current value of your property which could impact the interest rate available. Once the fixed-rate on your mortgage comes to an end, your lender will automatically put you onto the standard variable rate and your monthly repayments could rise, further putting a strain on your finances.

So, if you are considering purchasing a property with a small deposit and worry about getting into negative equity, then it may be worth considering buying through Shared Ownership as this scheme will greatly reduce the risks.

If I take out a fixed-rate mortgage, what happens at the end of my fixed rate?

At the end of your fixed-rate period, your mortgage will revert to the standard variable rate (SVR). This SVR is set by your lender and can go up or down, depending on interest rates or whether the lender simply wishes to increase the rate. So, you could well find yourself paying considerably more every month for your mortgage.

However, well before your rate comes to an end – normally around two or three months – your lender will write to you asking whether you wish to agree a further fixed-rate term or go onto the SVR.

If you took your mortgage out with a broker, like Censeo Financial, they will also get in touch to conduct a full financial review and assess which is the best rate for you going forwards. This could mean (1) staying with your existing lender and moving to a new fixed-term mortgage, (2) moving to a new lender or (3) deciding you wish to increase the size of your mortgage to pay for home improvements or, if you bought a Shared Ownership property, to staircase up and buy an increased shared in your home.

As always, it pays to stay up-to-date with what is happening in the mortgage market so you can make sound financial decisions.

Share to Buy is a one stop shop for affordable homes. On our website, you can search for properties, compare mortgages and find out all you need to know about alternative home buying schemes such as Shared Ownership via our article index.