Becoming a landlord is a great feeling for any person. If you're a first-time buyer, taking out the first mortgage can leave you confused. There are so many mortgage options available on the market. Then how do you choose? Getting a mortgage advisor can take a lot of time. We understand that time is of priority when you don't want to let go of the house you want to buy. Hence, we simplify the process for you so that you can save on your time and effort.
With us, you can understand the mortgage deals available, do the essential mortgage comparison and get the best and lowest mortgage rates. You can read about what is mortgage and use a mortgage calculator to compare your income and expenses. Our financial advisors can assist you in our online process that is fast and easy. From how much you can afford to how much a mortgage will cost you in terms of monthly payments, we offer a tailored mortgage for first-time buyers at competitive rates. With our various remortgage choices, second home buyers can now borrow more or even make changes to their existing mortgage.
A mortgage is also called a home loan. Any person who wants to buy his own house can seek funds from a mortgage. The amount given as mortgage can be used only for buying property. It cannot be used for anything else.
These are long term loans that go on for a span of 25 or 30 years. You can opt for a shorter loan period though. Over these years, you pay back little by little every month. You may choose to pay back only interest or interest and capital monthly.
The former is a bit riskier though. A home loan itself is fraught with risk as it is tied to your home. That means it is a secured loan. If you cannot make repayments on time, or become broke, your house is taken into possession and sold to recover the rest of the loan..
Mortgages work in different ways. It is a financial product that can be tailor-made to suit different requirements. The way home loans work is dependent on their type. A mortgage advisor can assist you in choosing the best mortgage company and product.
Mortgages can be customized from person to person.
Lenders understand that 'one-size-does-not-fit-all', so you can request for changes to be made to the mortgage you want to take. The list of mortgages is long. But I'll explain it in brief here.
Every mortgage type is basically a repayment mortgage with some slight changes. Interest-only mortgage is different though. Over the 25 years, you repay some of the interest plus some of the capital you owe. This is best for people who need to be sure they will have a house at the end of the term.
Here you pay just the interest month after month and pay the capital in lump sum at the end of the 25 years. You need to be confident that you will be able to pay back all of the money, either using your savings or inheritance. If you are not able to pay it back, you may have to sell your property. To avoid this situation, lenders may insist on knowing how you plan to repay the loan. This is best for people who want the lowest monthly repayments.
Fixed rate mortgages carry a fixed rate of interest for the number of years you have borrowed for, i. e. for say 10 years. Your payments for those many years will remain fixed regardless of what happens to interest rates. The market trend will not affect your interest rate. However, you may be losing out on your money if rates go down. This is best for buyers who are focused on meeting their budgets.
Every lender has an SVR (Standard Variable Rate) mortgage. This is a basic form of mortgage. The interest you pay will go up and down in tune with mortgage rates. They are partly influenced by Bank of England rates. This is for those who think mortgage rates are going down.
Tracker mortgages track a nominated rate of interest which is set by the Bank of England. As the base rate of the Bank moves up and down, so will your interest rate. Usually, mortgage rates will be a percent or two above or below the base rate. Some lenders set a minimum base rate below which the rate can never fall. So you can never actually end up paying no interest even if rates go down. Assume base rate 0.5% and add-on rate of 1.5%, the interest rate you'll get will be about 2%.
The discount rate is a deduction from the lender's standard variable rate (SVR). These are the cheapest you can get if you grab it in time. The deal lasts only for 2 to 5 years. The rate will go up and down if the SVR changes. This is good for buyers who would like to pay less interest but can afford to pay more.
Capped rate places a cap or ceiling on how high your interest rate can rise. This saves a buyer much worry when interest rates hit the roof. He knows he will never be charged an exorbitant rate. As mortgage rates have been low in recent years, lenders may not offer this product anymore.
In a cashback mortgage, you get your cash back. This is a marketing incentive offered sometimes by lenders. When you become their customer, they return a percentage of the loan. Yet, you may actually be getting fooled as you may be paying much more by additional fees, etc. This is good for people who need a lump sum to help with moving house
Offset mortgage combines savings and mortgage together and is linked to your savings account. Each month, the lender deducts the amount you owe from your savings. For example, if you have a mortgage of £200,000 and savings of £15,000, your mortgage interest is calculated on £185,000 for that month. That is, you pay mortgage interest on the difference between the two. So instead of your money lying in the savings account, you cash it out as interest. This is particularly of help to higher rate taxpayers.
95% refers to the percentage of the total value of the immovable property that you can borrow. This financial product is for those people who have only a 5% deposit.
Flexible mortgage offers you flexibility in your repayments. When you have more money, you can more than you owe every month, and when you are short of money, you can miss a few payments. In return for this feature, the mortgage rate is higher than other types.
Buy to let is for those buyers who want to invest in a property to earn from it in future, e.g. by way of rent.
Housing in the UK is subdivided into four broad types:
A detached house is a house that is built in a vast area of land. A bungalow or similar establishment surrounded by woods can be called a detached house. The name itself means that it is 'detached from the rest'. As greater privacy is to be had, these houses are very popular and also highly valued. Victorian, Tudor and Minimalist are the varied styles of detached houses. They include bungalows, cottages and mansions.
A semi-detached house is a house that shares a wall with a neighbor. That means they have a common wall. Semi-detached houses are built in an identical manner. They are less costly than detached homes. However, they are popular with middle-income families as they look fashionable. Homeowners can extend to the side and behind the house.
Another name for a terraced house is row house or townhouse. These are typical to towns and cities that used to be the hubs of industry in those days. Terraced housing originated in the middle of the 17th century but did not become popular till the 19th century, when workers colonized them. They differ from semi-detached houses in that both their side walls are shared by neighbors.
One usually gets to see flats in the urban areas like cities. A flat is a residential unit that is a part of a skyscraper. These buildings have a number of floors with two or three units each. A flat is also called an apartment. Flats can be regular or built for a purpose e.g. a studio flat. Buildings are generally housed inside a complex that has public spaces for socializing. A reception and garden may be included in addition to a lift.
Buying a home can turn out to be quite simple for a first time buyer if you know the ins and outs of home-buying. There are certain steps if followed in a sequence that makes the whole process a lot easier. Most often, you may need a mortgage loan for your home. Let's look at the home-buying process.Find an affordable property
The term 'affordable' varies according to income level. It is for you to find out which property is affordable for you. You may be interested in a house or flat. Whatever be the case, you will have to make monthly payments which are constant. Consider your financial situation carefully.Find a suitable mortgage product
A mortgage advisor, broker or lender can give you more clarity on the products available and help you choose. Compare products on their principal amount and interest rate.
Your credit report is a report of your credit behavior. Anything you do that is involved with credits and debt gets recorded here. On the basis of how you managed your finances, you will get a credit score. A credit score is a number from 0 to 999. A FICO score, created by Fair Issac Corporation, is used by credit lending agencies to assess how much of a risk a borrower is. 30 percent of this score is based on the amounts you had borrowed, 15 percent on the duration of borrowing, 10 percent on the mix of credit and 10 percent on new credit inquiries. A score that is 579 or less ranks as bad credit. This is a potential turn-off for lenders.Make an offer
At this point, you make an offer as to how much you would like to pay for a particular house or flat. An estate agent will usually do it for you.Arrange a surveyor and solicitor
A surveyor does the work of surveying the property for problems. A solicitor will handle all the legal work around the property. He will submit searches to the local council to check for issues. He also checks town planning details to see whether the property price will get affected in the future.Exchange contracts
Your estate agent will exchange contracts with the seller's estate agent. At this point, both parties are committed to buy and sell transaction.Last few steps
You may need to pay the solicitor for his services as well as a mortgage account fee.
The principal amount is also called capital. It depends on how much amount you are willing to lay down as deposit. Some people have more savings, so they can pay a high deposit amount. It is better to pay at least 10 % amount from your savings and take a loan for the rest 90%. This 90% is called the Loan to Value (LTV).Interest
How do lenders make profit? By charging interest. Interest is common to any loan. The amount of interest payable depends on the mortgage rates you are offered. A higher interest rate surely entails a higher amount of interest. If the principal you wish to borrow is less, you may be offered a low interest rate.Taxes
Every home owner is obliged to pay property taxes to the government. It is calculated upon the value of your house.Mortgage insurance
If you are putting down a 20% deposit or less, your lender might tell you to apply for mortgage insurance. Mortgage insurance basically protects the lender from defaulting payments by the borrower. It reduces the lender's risk. But, it also increases the cost of your loan. The smart thing to do is to pay a 20% or more deposit upfront so that you do not have to spend on buying insuring your mortgage.Mortgage note
A mortgage note is a promissory note that is a legal document you have to sign when your mortgage is approved. It contains an underlying promise that you will repay the principal along with interest and costs within the agreed time.
You will need to submit the following documents along with your mortgage application. It's a clever idea to be proactive and collect all the necessary documents beforehand.
√ Documents for identification (mostly full passport or driving license)
√ Documents for address proof (utility bills, bank statement)
√ Documents for income proof (copies of last three months' pay slips)
√ For self-employed, documents of profit levels proof of last three years
From the time you submit your application till the time your mortgage gets approval, there are a few steps that take place in the background. These are:Assessment
Your application is assessed by the lender. He tries to verify whether you are within your budget level. He also verifies the documents you provided for their authenticity. If everything is appropriate, your application is moved to valuation.Valuation
At this stage, the lender will appoint a surveyor to correctly value the property. He does this and prepares a Valuation report.Offer
The lender will make you an offer. This offer will be based on property sale price, loan amount and the mortgage product you want.Completion-
Your solicitor will exchange contracts with the seller's solicitor on a specified date. You pay your deposit to the seller.What are the pros of mortgage?
Mortgages can be beneficial to you in the following ways-Cost-effective
Mortgages are cheaper than other long term loans. This is because its interest rates are usually lower.Customized
Mortgage products are customized according to requirements. They differ from one person to another based on their income level, credit history and property price. For people with a poor credit history, there is bad credit mortgage.Longer repayment period
Mortgages are usually taken for a long term, say 25 or 30 years. This reduces the monthly amount that goes towards interest and capital repayments.Investment
If you invest in a house today, you can either live in it tomorrow or lease it out. But, if you are living on rent, your owner might tell you to move out anytime. And you have nothing to fall back on after retirement.What are the cons of mortgages?
A home loan is basically a debt that you owe a lender. Promising to pay a substantial amount comes with a lot of risks, especially in case of bad credit mortgage. You cannot predict how circumstances will be in the coming years.Unsecured buyer
A home loan comes with a clause that if you fail to make repayments, your home can be repossessed and sold off. So the borrower is unsure whether he will get to live in his house at all. It's all uncertain.Add-ons
Every financial product comes with hidden costs. These are not declared beforehand. However, when the time comes for you to pay, you have no option. So one should carefully consider how much one can afford.Dynamic interest rate
As your loan is spread out over a long duration, lenders would be willing to offer only mortgages with flexible interest rates. While it is rare for interest rates to fall, they keep rising all the time. You may discover that you end up paying more than you expected.What are the fees and costs associated with mortgages?
When you are taking out a mortgage, you will need to pay various fees and costs. Let's understand them.Mortgage costs
Since March 2016, lenders have been told to include any mortgages related fee as part of the annual interest calculation. This is called Annual Percentage Rate of Charge or APRC.Arrangement fee
It is sometimes known as product/ completion fee. This can be added to your product, but it will only increase the amount you owe.Booking fee
This is usually a one-time, non-refundable fee. It may be charged when you apply for a mortgage deal. Sometimes it may be included in the arrangement fee itself.Valuation fee
This is the fee you pay to the lender to appoint a solicitor who will conduct a property check for you. If you do not wish to pay this, you can get your own solicitor. The lender's survey might only look at the monetary value of the property and not any likely problems.Telegraphic transfer fee
This is the fee your mortgage provider transfers to the solicitor. It is sometimes called CHAPS (Clearing House Automated Payment System). It is non-refundable.Mortgage account fee
This is the fee you have to pay to set up, maintain and close your mortgage.Mortgage broker fee
If you hire a broker to give you advice, you may have to pay him for his services.Higher lending charge
This is basically mortgage insurance you pay if you can afford only a small deposit.Early repayment charge
This charge might apply if you wish to make an early repayment in future.Exit fee
This charge might apply when you have repaid all your money and wish to close the mortgage account.
A mortgage payment calculator is an automated tool that enables a first time buyer to understand how much monthly mortgage repayments they can afford. A lender uses a mortgage calculator to assess the financial suitability of a loan applicant. The major variables taken into account are the principal, periodic compound interest rate, number of payments per year and regular payment amount. Almost every mortgage payment calculator provides mortgage comparison
Yes. Deposit size does affect mortgage. Let's try to understand this. The more deposit you have, the less you have to borrow. As explained above, the amount that you borrow is calculated as a percentage of the price of your property. Say your property costs £200,000 and you can afford a deposit of £20,000. This £20,000 forms 10% the cost of your property. So you will need to borrow an amount equal to 90% the house value. This 90% is called the LTV or Loan to Value. It is seen that the lower the LTV, the better the interest rate you are likely to get. The people with 40% deposit usually get the best mortgage rates. Because less borrowing means less risk. .
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