Mortgages are loans that help people to buy properties.
When taking out a mortgage, your lender will charge you interest in return for lending you money, while mortgages are also secured against the property being purchased.
That means borrowers who default on their mortgage payments could be at risk of having their home repossessed.
How much you’ll be able to borrow through a mortgage will depend on:
When you remortgage, you’re take out a new mortgage, but without moving home.
Property owners often remortgage when their current deal expires, so they can secure a better interest rate.
But remortgages also occur if owners want to borrow more capital, perhaps to do home improvements.
Conveyancing is the legal work performed by a solicitor or conveyancer when you buy or sell a property
Conveyancing is one of the most crucial steps of buying or selling property.
When applying for a mortgage, your lender will need you to provide proof of your income as part of their financial and affordability checks – and that means providing a series of documents.
Employed applicants are usually required to show at least three months of payslips and an annual P60 to prove their salary.
Self-employed applicants, meanwhile, may be asked to provide an SA302 form showing their tax calculation, as well as at least two years of accounts.
All applicants may also be asked to provide three-to-six-months of bank statements showing incomings and outgoings.
The most common term for a UK mortgage is 25 years.
However, longer, or shorter terms may be available depending on your lender’s criteria, your age and the affordability of the mortgage.
Speak to a mortgage advisor, who will be able to run through your options.
With so much choice, choosing the right mortgage can be daunting and confusing.
When considering which mortgage is right for you, look at your long-term plans and personal circumstances.
Speaking to a mortgage advisor about your needs can also help.
When you apply for a mortgage, there are a range of fees you could have to pay.
Those fees could include:
If you have to pay back your mortgage by a certain age, this will be outlined in your lender’s terms and the schedule of your mortgage.
To find out more, speak to a mortgage advisor.
There are both similarities and differences when it comes to standard variable rate (SVR) and tracker rate mortgages.
Both are classed as ‘variable rates’ because rates can go up or down over the term of your mortgage, meaning your monthly repayments can change, too.
An SVR mortgage is charged at the lender’s standard rate of interest and usually comes with no tie-in period or early repayment fees.
SVRs usually follow the Bank of England’s base interest rate, meaning they can rise or fall in line with UK-wide changes to interest rates.
This means you could find yourself paying more, or less, depending on those changes.
Tracker mortgages also follow the base rate, with the rate of interest you pay usually slightly below or slightly above that base rate.
Like SVR mortgages, your monthly repayments can go up or down with a tracker mortgage, depending on any base rate changes.
Trackers usually come with a tie-in period, while early repayment charges may apply if you pay down your loan before the end of the tie-in
Lenders may apply a Higher Lending Charge (HLC) to a mortgage if the amount of money being borrowed exceeds the value of the property being purchased.
In most cases, lenders will use this fee to purchase an insurance policy to protect them from losses should the buyer get into financial difficulty and struggle to pay back their mortgage.
If you’re tied into a mortgage deal for a certain amount of time, you may have to pay an early repayment charge if you pay off your mortgage within the tie-in period.
Fixed rate, tracker rate and discounted rate mortgages usually come with early repayment charges, while standard variable rate (SVR) mortgages usually have none.
Early repayment charges are usually charged as a percentage of the outstanding mortgage.
If your property has a standard residential mortgage secured on it, you may have to get your lender’s permission if you later want to rent out that property to tenants.
Your lender may move you on to a buy-to-let mortgage, meaning you could also move to a higher interest rate – put in place to counter your lender’s increased risk.
If you’re having financial problems and you’re struggling to pay back your mortgage, speak to your lender.
Most lenders have dedicated helplines and facilities that can help.
While most insurance policies aren’t a legal requirement when you take out a mortgage, your lender will insist you have a buildings insurance policy in place before you move in.
Other policies, such as life insurance or contents insurance, can also help to protect your investment, so are worth considering.
Mortgage agreement in principles (AIPs) are simply a notification that a lender will consider your application based on the information you’ve given them.
An AIP doesn’t mean you’re obligated to take a mortgage with that lender, nor does it obligate the lender to loan you money.
So, if you have an AIP but later find a better deal from a different lender, there’s nothing to stop you exploring that new option.
When taking out a mortgage, you do have an element of choice when it comes to your mortgage term.
However, you’ll need to consider affordability factors and your lender will do the same.
A shorter mortgage term means you’ll potentially pay less interest over time, but your monthly repayments will be higher.
Seek advice from a mortgage advisor about the best term for you.
The amount you’re able to borrow will be determined by your income and expenditure, as well as your lender’s assessment of your finances and affordability checks.
Having a bigger deposit can help, as you’ll be borrowing less, meaning your income goes much further on those affordability checks.
Taking out a mortgage will usually mean there are additional fees you’ll have to pay.
Some of these fees will need to be paid up front, while others can be added to your mortgage loan.
Adding fees to your loan will mean you pay back more over time.
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.
The larger your deposit, the less you’ll need to borrow to buy a property.
Many lenders will insist on a minimum deposit of 10%, although some will lend with a 5% deposit or offer mortgages under the Help to Buy scheme for first-time buyers.
Mortgage protection insurance isn’t a legal requirement when buying a property, but it can provide key peace of mind should you or your family be unable to pay your mortgage due to injury or death.
A poor credit history doesn’t always mean you won’t be able to secure a mortgage.
The best approach is to speak to an independent financial advisor to discuss your options in the first instance.
It’s possible to buy a property at auction with a mortgage.
However, you’ll need to have some key things in place prior to doing so.
When you buy at auction, you’ll exchange contracts and pay a deposit in the auction room and then have a further 28 days to complete.
Before attending an auction, ensure you have your deposit funds in place and a mortgage agreement in principle (AIP) from your lender.
Because auction properties complete in such as short space of time, you should speak to a mortgage advisor for guidance on how quickly your application can be completed.
There’s no legal requirement for you to take out a survey when buying a property.
However, it’s highly recommended.
Your mortgage lender will perform their own valuation but having a survey can give you peace of mind that the property you’re buying is structurally sound and has no major, costly problems.
Your mortgage advisor should be able to help with guidance on the types of survey available.
How much you’ll be able to borrow through a mortgage will depend on:
A repayment mortgage is the most common type of mortgage in the UK.
With a repayment mortgage, your monthly repayments pay down both the interest and the capital, meaning if you make all your payments over the mortgage term, you’ll have nothing more to pay.
At the start of a repayment mortgage, you’ll pay down more interest than capital, but as the mortgage term progresses, you’ll start to pay down the capital more quickly.
