Sponsored Content
Peter Seymour of The Mortgage Shop outlines the range of loan types available in the Island
MANY people think that borrowing money is restricted to hire purchase and house mortgages, although, in reality, there are many other options that have evolved over the past four decades, with some having faded into obscurity while others have been refined to match the everincreasing demands from sophisticated borrowers.
In Jersey we have access to eight different options, which cover the majority of the requests which our team at The Mortgage Shop is asked to source.
Personal loan/hire purchase
This type of lending is available to borrowers wishing to buy a car or a small boat, as well as providing funding for a new kitchen or other home improvements. These loans can also be used for debt consolidation, although this is not recommended. A maximum of £30,000 is available to all borrowers although this increases to £50,000 if the applicant is a homeowner. There is also hire purchase, often referred to as HP, which is available for small loans for, say, a laptop or a new phone.
The process is simple, and funds are frequently available within a day or two of submitting the application subject to credit check and sufficient income being available to service the loan.
High-value vehicle finance
This type of loan is used by collectors of high-value classic cars where a charge is taken over the vehicle, which is usually owned by a Jersey-based holding company. An alternative is to release equity from a residential property owned by the collector.
Marine finance
Specialist lenders offer finance to facilitate the purchase of yachts and power boats. The boat has to be either new or only several years old and registered under part 1 of the British Register of Shipping, so that a charge can be taken against the asset. An alternative is to release equity from a residential property.
House mortgage/ equity release
Mortgages are generally available up to 90% loan-to-value, although several options exist for 95%, or even 100%, mortgages. In the current climate of falling house prices, the higher LTV mortgages are not recommended, as borrowers could soon find themselves in negative equity where the value of their property is less than their mortgage.
The application process can be lengthy, and purchasers should allow between eight and 12 weeks from deciding to purchase to receiving the keys.
There are currently seven mortgage providers in Jersey and using The Mortgage Shop will save purchasers the considerable effort of trying to source the best and most appropriate mortgage to use.
All lenders will take a close look at the income of applicants, their credit history and the cost of everyday living, taking into account everything from personal loans to children.
Lower LTVs will reward borrowers with reduced rates of interest, and there are several options from which to choose from tracker rates to rates that will be fixed for the first two, three or five years, or sometimes longer.
Terms of up to 40 years are available and are usually subject to a maximum age of 70.
Equity-release mortgages are also available and are popular with people looking for funds to modernise their property or to buy a boat or a classic car.
Buy-to-let mortgages
This is used by people who wish to acquire property for investment. The maximum LTVs are 70% or 75%, and the interest rates are generally higher than for residential borrowing.
Property investment in Jersey has waned in recent years owing to high stamp duty and lower returns, as well as the introduction of a tenants’ charter. Advice should be sought before venturing down this route.
Private mortgage
This type of lending has been in existence for many decades and was originally available from lawyers looking for a return on clients’ funds, hence the name “advocates’ loans”. For the past four decades, however, individuals have preferred to run their own loan books and have generated a high return from this activity.
Few private lenders exist these days, either because they have retired or have been put off by new restrictions introduced by the JFSC.
Later-life lending
Generally known as home-equity mortgages, funding is made available as a charge against an unencumbered property owned by people in retirement who are looking for extra income to boost their pension or funds to replace the roof or take a world cruise.
Interest on the loan rolls up and is repaid from the sale of the property in due course. This type of lending is popular in the UK, although none of the local lenders have an appetite to introduce this badly needed facility.
Development finance
This type of funding is regarded as being high risk and the interest rates charged will reflect this risk.
Generally used to fund the construction of office blocks and multiple housing units, the maximum LTV will usually not exceed 65% to 70%. Interest is usually rolled up and repaid at the time the loan is repaid when the buildings are sold.
Self-build projects also use this type of finding as no banks will offer a conventional mortgage until the property has been completed
