A mortgage is a loan used to buy a property.
In return for lending you capital, lenders charge interest, while mortgages are also secured against the property – meaning failing to pay back your mortgage could put you at risk of repossession.
The amount you’ll be able to borrow through a mortgage will depend on a number of factors, including:
By remortgaging, you’ll be taking out a new mortgage but not moving home.
Reasons for remortgaging could include:
When you buy or sell a property, conveyancing is the legal work undertaken by a solicitor or conveyancer on your behalf.
Your mortgage lender will need you to provide proof of your income so they can assess how much they may be willing to lend you.
If you’re employed, you may be asked to show at least three months of recent payslips, as well as an annual P60 to prove your salary.
Self-employed mortgage applicants are normally required to provide an SA302 tax projection form and at least two years of certified accounts.
Your lender may also request to see bank statements that show your incoming money and outgoing costs.
Mortgage terms can vary, but the most common term is 25 years.
You may be able to take out a mortgage for a longer or shorter term, depending on your lender’s criteria and their affordability assessment.
To find out more about your options, speak to a mortgage advisor.
There are many different types of mortgage available, so choosing the right one for you can be difficult.
When considering mortgage deals, think about your long-term plans and speak to a mortgage advisor to discuss your needs.
By taking out a mortgage on a property, there are number of fees you may have to pay:
Your lender should clearly outline in their terms and conditions, and your mortgage schedule, if you have to pay back the loan by a certain age.
Speak to a mortgage advisor to find out more.
There are clear differences between a lender’s standard variable rate (SVR) and tracker rate mortgages – but also some similarities, too.
SVRs and trackers are both variable rate mortgages – meaning the interest rate you pay and your monthly payments can go up or down at any time.
A lender’s SVR is their standard rate of interest and mortgages on this rate usually have no tie-in period or early repayment charges.
Because SVRs generally follow the Bank of England’s base interest rate, they can rise and fall.
This means your monthly payments may also change.
Tracker mortgages also follow the Bank’s base rate, but the rate of interest you pay is usually slightly below or slightly above that base rate figure and you’ll be tied in for a certain period.
Like SVRs you could see your monthly payments change on a tracker, while this type of mortgage will usually have early repayment charges attached to it.
Higher Lending Charges (HLCs) are issued by mortgage lenders when an applicant’s mortgage amount exceeds the value of the property they’re buying.
Lenders, in most cases, will use the HLC to purchase an insurance policy, protecting their interests should the applicant struggle to repay their mortgage.
Early repayment charges are put in place by lenders on some mortgage deals.
During a fixed period of time, if you repay your mortgage in full or in part, perhaps because you sell, you may be charged a fee.
Most fixed rate, tracker rate and discounted mortgages have early repayment charges attached, but standard variable rate (SVR) mortgages usually do not.
Early repayment charges are usually charged as a percentage of the outstanding mortgage.
If you have a standard residential mortgage but want to rent out your property to tenants, you’ll need your lender’s permission.
Your lender may switch you on to a buy-to-let mortgage, which could come with a higher interest rate, as buy-to-lets carry more risk for lenders.
If you get into financial difficulty and can’t pay your mortgage, speak to your lender as soon as possible.
Lenders have help systems in place, including helplines and facilities, that can assist.
When you have a mortgage, your lender will insist you take out a relevant buildings insurance policy before you move in.
While life insurance, contents insurance and other property-related insurance policies aren’t a requirement, they are worth considering to protect your investment.
Even if you have an agreement in principle (AIP) with one lender, you can still explore deals with other lenders if you wish.
An AIP doesn’t tie you to that lender and is only in place to show that lender is willing to consider your application for a certain amount of capital.
Despite having an AIP in place, the lender is not obligated to provide you with a mortgage, and you are not obligated to accept one.
Your income and expenditure, as well as your credit history, will largely determine how much you’re able to borrow through a mortgage.
Your lender will assess your financial situation and perform affordability checks before outlining how much they are willing to lend you.
When you apply for a mortgage, there are several fees you may have to pay.
Some fees are payable up front, while others may be able to be added to your mortgage.
However, you should remember that adding fees to your loan will mean you pay back more.
Some mortgage fees are refundable, and others aren’t, so speak to a mortgage advisor or broker who will be able to provide a breakdown of the fees you can expect and the terms behind them.
Most lenders accept a minimum deposit of 10% of a property’s value.
However, some mortgage deals are available for buyers with only a 5% deposit, while the Help to Buy scheme can assist first-time buyers with a 5% deposit.
By saving a bigger deposit, you may be able to secure a more attractive interest rate.
Mortgage protection insurance isn’t legally required when you take on a mortgage.
However, it can add a key layer of protection for your loved ones should you pass away or become injured and unable to work.
Having a bad credit history can affect your ability to secure a mortgage.
Try to improve your credit score if you can and speak to an independent financial advisor to discuss your options.
Buying a property at auction is a much faster process than buying on the open market.
And because it’s quick, it’s important to have your mortgage arrangements in place before you start bidding.
If you’re the successful bidder on a property, you’ll exchange contracts and pay your 10% deposit there and then in the auction room.
So, as well as a mortgage agreement in principle (AIP), you should ensure you have the funds in place to pay your deposit before attending an auction.
Once you’ve exchanged contracts, you’ll have 28 days to complete, so speak to a mortgage advisor for guidance on how quickly your application can be completed.
Taking on a repayment mortgage means your monthly payments will pay off both the capital and interest elements of your loan.
At the start of your term, you’ll pay down more of the interest, before paying down more of the capital as the term progresses.
If you make all your repayments over the whole mortgage term, you’ll have nothing more to pay at the end and you’ll own your home lock, stock, and barrel.
