A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Are you ready to make one of the most important financial decisions in your life? Our ultimate mortgage guide will provide you with all the information and insight needed to properly understand mortgages, so that you can find the right deal for your needs. Be sure to take into account any other outstanding debts when securing a loan against your home – if not kept up on repayments, repossession may occur. With this helpful guide by your side though, making an informed decision is simple!
Please remember that a mortgage is a loan secured against your home. Your home may be repossessed if you do not maintain repayments on your mortgage or any other load secured against it. You may have to pay an early repayment charge to your existing lender when you reportage.
What is a mortgage?
A mortgage is a loan from either a bank or building society that allows you to purchase your dream home. This type of loan is ‘secured’, meaning the financial institution has legal grounds to repossess and sell your property if payments are not made in full and on time each month.
How does it work?
Obtaining a mortgage signifies that you’re responsible for repaying your loan, along with the accumulated interest over an estimated 25 year term. Though some mortgages may last longer or shorter in the UK; at any rate, it is guaranteed to be secured against your property until paid off entirely. Individuals are able to take out their own mortgage or join forces with others and get a joint mortgage if desired.
Differences between a loan and a mortgage?
A mortgage is an incredibly common form of loan, which involves the use of the borrower’s property as security. This type of financial agreement between two parties sees a lender or creditor offer money to the borrower, who then agrees to repay it plus interest in regular monthly instalments over a set term. While mortgages are secured loans, there are also unsecured ones that can be taken out without needing any assets as collateral; they usually come with lower amounts borrowed but higher interest rates however.
What is mortgage deposit?
A deposit is a type of down payment you make towards your upcoming property purchase. The greater the amount paid in advance, the less money that needs to be borrowed as part of a mortgage loan. This will also open up more competitive rates and terms when shopping for mortgages.
A deposit is a percentage of the property’s value, so if you bought a house for £400,000, a 10% deposit would come to £40,000. Your mortgage provider will lend you the remaining 90% of the purchase price.
By calculating the Loan-to-Value (LTV) ratio, you can determine what percentage of the property cost must be borrowed from a lender. For instance, if your intended purchase is £400,000 and LTV is 90%, then it means that to make this acquisition possible you need to obtain a loan amounting to £360,000 – or just short of its full worth.
A 95% mortgage would equate to a £20,000 deposit and an astounding £380,000 loan in the mentioned case above. With just 5% down you can make your dream of owning a home come true!
Companies from where to find a mortgage
The UK mortgage market is predominantly serviced by banks and building societies, however financial companies also offer mortgages for prospective homeowners.
Deciding between a mortgage lender and broker can be complicated. To make it easier, use our comparison tables to find the ideal loan for you directly from a lender. Or if you need further assistance in selecting your mortgage, seek advice from an independent financial adviser or mortgage broker who may have access to exclusive deals not available through lenders. Keep in mind that some brokers offer whole-of-market services meaning they work with all possible lenders so you’ll get the best options depending on your individual circumstances.
Various type of mortgages
With a vast array of mortgages available, it can be difficult to figure out what type is right for you. Whether you’re looking for your first home, trying to become a landlord or planning on mortgaging.
Are you a first-time buyer looking for the perfect mortgage? Even if you have minimal funds available to put down, there are mortgages and schemes designed with first-time buyers in mind! To gain access to your dream home, here is everything that you need to know about obtaining your very first mortgage. These include:
- Shared Ownership mortgage: please talk to us for the available mortgage products
- Right to Buy grants eligible buyers access to discounted council homes.
- Guarantor Mortgages offer an alternative route by allowing a friend or relative’s name on your mortgage agreement as security should you miss any payments.
More type of mortgages
- Have you experienced financial struggles in the past? Don’t worry! Bad credit mortgages are here to help. Here is everything you need to know about getting a mortgage with bad credit.
- If you’ve been dreaming of owning a home, but lack the funds for an adequate down payment, don’t despair! 100% mortgages or mortgages with zero deposit required are available if you enlist the help of a guarantor. On top of that, even those who have saved only tiny sums can still find ways to make their property dreams come true.
- Obtaining a self-employed mortgage can be a challenge for those who don’t have the standard proof of income required by lenders. Luckily, there are ways to secure this type of loan even if you’re in that situation –
- Obtaining a commercial mortgage will help you purchase real estate to serve as an investment or for your business operations.
- Even if you’re beyond a certain age limit imposed by most mainstream lenders, there may still hope for securing a mortgage with Mortgages for older borrowers in retirement.
More specific type of mortgages:
- Buy-to-let mortgages can be the ideal solution for you if you’re looking to rent it out. Here’s all the information you need about buy-to-lets.
- Second mortgages are also available, perfect for those wanting holiday homes or investment properties.
- Lastly, bridging loans are great if you need extra funds for another house acquisition or renovation projects; they use your property as collateral and can even serve as temporary financing while waiting on a sale to go through.
The Financial Conduct Authority does not regulate most forms of buy to let mortgage.
The difference between interest only and repayment mortgages
Generally, mortgages are set up in a repayment format. Your month-to-month payments will be allocated for both the interest and paying off your outstanding balance; eventually, you’ll have repaid the entire loan amount by the end of it all. But with an interest-only mortgage, only covering the owed rate is necessary – no decrease in debt will occur here! That said, when you reach term’s end, having saved up enough from another source (like savings accounts or investments) to pay back what was borrowed must take place.
What happens if you miss a mortgage payment?
When you take out a mortgage, it is essential that you make all your payments on time to avoid any detrimental outcomes. If you miss one or more instalments, not only will your lender probably charge a late fee but also report this incident to credit reference agencies which could have an undesirable influence on your credit score. As such, contact the lender immediately and they will help work with you toward rectifying the situation whether through deferred payments for some time, reduced monthly payments over certain period of time or by extending the term of repayment for your mortgage.
The difference of fixed or variable mortgage
There are a variety of ways for mortgages to determine their interest rates, including but not limited to:
- Variable mortgage rates can fluctuate unpredictably; however, they tend to follow the Bank of England base rate.
- In comparison, fixed rate mortgages provide security by ensuring that their interest rates remains unchanged for a period ranging from 1-10 years or also for the entire term of the mortgage.
- Tracker mortgages have adjustable rates that mirror the Bank of England’s base rate. For example, lets assume that the base rate stands at 3.5%, and your mortgage is 4.5%. If the base rate later increase by another 0.5% to 4%, so too will your mortgage that will also increase to 5% (4.5% + 0.5%).
- Alternatively, discount mortgages offer a lower fee than their lender’s standard variable rate and are valid for an agreed period (one year or more). So why not consider these options when deciding on which type of mortgage best fits you?
How to get a mortgage?
If you are purchasing your first home, save up a deposit and consider using the equity in your current house if you plan to buy your next property. Get the help of a dependable mortgage broker to find the ideal loan for you – just make sure it’s one that fits into your budget! When ready, submit an offer on the property of your choice; if accepted, proceed with your mortgage application.
What do you need to apply for mortgage?
Ready to apply for your full mortgage? Follow the steps below to guarantee a successful application process:
- To get your mortgage application ready, gather the required documents – ID (e.g., passport), proof of address (utility bill), income evidence (at least three months’ payslips and P60) plus deposit information. If self-employed, prepare two to three years’ worth of accounts for the lender’s perusal.
- Next, fill out an application form providing details about the property you’d like to purchase along with its agreed-upon price tag.
- To finalise everything in a legally binding way appoint a solicitor who will take care of all paperwork as well as necessary searches.
- Carry out a survey on the house you intend to purchase. This is done in order to determine its current value and condition. You have several options when it comes to surveys – opt for either a basic condition report, comprehensive homebuyer report or complete structural survey depending on how detailed of information you need about the property’s state.
- Once your mortgage has been approved and everything is ready, both solicitors will officially exchange contracts of sale through signing official documents.
- The final step of the process is when money exchanges hands, at which point you are legally and officially granted ownership of your new home. To ensure that everything runs smoothly and to take away any lingering anxieties, please work closely with your mortgage broker and solicitor.
Are you eligible to be accepted?
When it comes to the decision of whether a lender will offer you a mortgage, and what amount they are willing to lend, several factors must be taken into consideration. These include: the property’s value; your deposit and age; how long you need the loan for; your credit record and income level and source; as well as if you’re applying individually or jointly with someone else.
The challenge of new mortgage
Making monthly mortgage payments is required once you move into your new home. Unfortunately, failing to pay could result in a damaged credit record and an increased debt amount – even the possibility of repossession by your lender – if you become too far behind. To ensure that these unfortunate scenarios never occur, set up a direct debit so money will be taken out each month as long as there are funds available in your bank account.
Tips for Getting a Mortgage
A wise financial move would be to have six months’ worth of mortgage payments and basic household expenses (such as bills and food) stored away in an emergency savings account. Even if you can only save a couple of months’ worth, it will provide some cushioning should your job fall through or your life take an unexpected turn. Here is more advice on how to effectively manage your mortgage so that you never miss any repayments while also making sure you are always getting the best deal available!
Whether you’re a novice buyer or looking to relocate, refinance your current mortgage, we are here to assist you in discovering the most suitable mortgage arrangement for your individual needs.
Whether you are thinking about getting your first mortgage, and need help and guidance on what to do, or whether you look to secure your next mortgage deal or review what may be done about the increased mortgager monthly payment, it is generally a good idea to talk to an experienced mortgage broker.
Your Mortgage Experts have the knowledge and experience to help and guide you, and advice on the most suitable available options.
Call us today on 020 8154 1111 or drop us an email to firstname.lastname@example.org
Your Mortgage Experts, London, W9 2HQ
Luca BertolinoMortgage Expert
Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.