Introduction to Mortgages
Getting to grips with the basics
What We Do
Insurance & Protection
There are times in our lives when we can all use some help and guidance. Buying a home is one of those major steps that’s much easier to take if you’re well-informed and get some good advice. Here, we’ll provide answers to a few of the questions we’re regularly asked by clients about mortgages.
What’s a Mortgage & How Does it Work?
A mortgage is a loan that you take out to buy a property. Most run for 25 years but can be shorter or longer. The money you borrow is called the capital and the lender charges you interest on it until it is repaid. The loan is ‘secured’ against the value of your home until it’s paid off. If you can’t keep up your repayments the lender can repossess your home and sell it so they get their money back.
When it comes to monthly repayments, these can be interest and capital, referred to as a repayment mortgage, or just interest, referred to as an interest-only mortgage.
With a repayment mortgage, you make one payment each month to your lender, part of which goes towards paying off the interest and part goes towards repaying the capital borrowed. At the end of the term of the mortgage, as long as you have kept up repayments, your mortgage is paid off.
With an interest-only mortgage you only pay interest each month, not the capital borrowed. This means at the end of the mortgage term you still owe the full amount that you originally borrowed and will need to make other arrangements for paying back the capital.
What’s types of Mortgages are available?
Mortgages come in various types and we can help you find the one that would work best in your particular circumstances. We can explain the pros and cons of fixed rate, variable rate, standard rate, discount rate, capped rate, tracker, offset and cashback mortgages. We’ll also talk you through the finer detail of how repayment mortgages and interest-only mortgages work. We keep up-to-date with the deals the market has to offer, including those offering free surveys or reduced legal fees, so we’ll be able to explain how these might work for you.
How Much Can I Borrow?
Lenders calculate how much they can borrow based on both your income and your outgoings. They also take into account how much deposit you have available. That’s why it’s important to be able to show a potential lender that you manage your money well, don’t have huge debts, keep your spending under review and maintain your bank account in good order.
How Much Deposit Do I Need?
Basically, the bigger the deposit you put down, the cheaper the mortgage. While some lenders are prepared to lend up to 95% of the property price, with the borrower putting in the remaining 5% as a deposit, better deals and rates are available to those who can put down, say, 20% or even more.
It’s important to remember there are also fees and charges that you will be required to pay as part of the process of putting your mortgage in place, so you’ll need to have savings in place to pay for these too.
What Does a Solicitor or Conveyancer Do?
They undertake the conveyancing, the legal transfer of ownership from the seller to the buyer. They also review the terms of the contract, carry out searches to ensure there are no planning issues, or problems like flooding, obtaining details of fixtures and fittings the seller is leaving behind, and obtain important documents such as Energy Performance Certificates. They arrange the exchange of contracts that commits you to the purchase, arrange your completion date, pay over the stamp duty and register your title with the Land Registry.
There’s a Lot to Take In – How Can I Get Help?
Getting a mortgage can seem like entering a financial maze. If you’re not familiar with the way the mortgage market operates, knowing where to start can be bewildering. We can help you work out how much you can afford to borrow, and we’ll recommend the most appropriate type of mortgage for you, identify the right lender and work with you to get a suitable mortgage. We know the criteria that the major high street and niche lenders use and we’ll help you present your application in the best way to the right lender.