A Quick Guide To Mortgages
A Quick Guide To Mortgages
A Quick Guide To Mortgages
It can be time-consuming, expensive and frustrating. To make matters worse, horror stories you hear of buyers agreeing a sale but then losing out to a higher offer before exchanging contracts, useless surveys and rogue estate agents. Hopefully this quick guide to mortgages' will help to put you straight on a few facts surrounding mortgages.
What is a mortgage?
A mortgage is a long term secured loan taken out to buy a residential property. A mortgage is guaranteed by the property, so the lender can sell your house if you don't pay the loan.
Where can I get a mortgage?
Mortgage lenders tend to be banks, building societies and financial advisor companies. They work directly and through a range of intermediaries such as agents or brokers.
What do I need to qualify for a mortgage?
Property buyers will need a certified or self-certified source of income, or the potential for income. A deposit of some sort can be important, but is not always essential. A good credit history can also help obtain favourable terms, conditions and interest rates compared to those without, but there are still plenty of lenders that offer bad credit mortgages.
Is a deposit required for a mortgage?
Although not all mortgages require deposits, the large majority do, and you will usually need to save a deposit of at least 10 per cent of the amount you wish to borrow. It is worth saving the biggest deposit you can because this can bring the mortgage interest rate down and reduce the chances of negative equity.
How much can I borrow?
Mortgage lenders advertise maximum borrowing amounts on the basis of an income multiplier. To do this you will need to multiply your yearly income by the income multiplier to find out the maximum amount of borrowing the lender is likely to allow.
What fees are charged?
Fees will vary depending on the mortgage, but some common types of fees you may face include; an arrangement fee, an early repayment charge (this comes into effect if a mortgage is repaid before a specified period), a final repayment charge (this is an additional fee applied on the last payment before the mortgage is completely repaid).
How do mortgage repayments work?
Mortgage repayments are split into two different parts:
Capital repayments
Interest repayments
The capital is the amount of money you have borrowed from, the bank to buy your home, and the interest is the lender's fee for lending you the money. The interest you pay depends on the size of the mortgage and the repayment period. For example, the longer the term, the more you will end up paying in interest. Most people choose to pay back the capital and the interest each month; this is known as a repayment mortgage. An alternative method is to choose an interest only mortgage, this can be either for a fixed period or for the full term. If you choose an interest only mortgage for the full term, you will need provisions put aside to pay off the loan at the end of the term. This may be something like an ISA plan or an endowment, but, as with all investments there is an associated risk that the sum provided on maturity may not meet the liability.
This is a quick guide to mortgages; for more information contact Samuels Financial, Mortgage Advisor Manchester on 0161 773 5777. Whether it's a new mortgage or a remortgage, their colleagues can offer you mortgage solutions tailored to your individual needs.
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