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Looking for a suitable mortgage product can be a tiring experience. Access to the internet could end up ease the experience in the majority of cases. Currently a great number of lenders have an online representation and can promote their services and benefits over the web. You can make use of the internet to speak to mortgage lenders to compare mortgage options. The mortgage lender's advisor should be able to help you on the right
What is a mortgage?
In basic terms a mortgage product is an advance arranged to purchase a house, paid back over an agreed term. The general repayment term of a mortgage loan is around 25 years but it can be varied to go with your situation.
A mortgage is composed of two clear parts : the capital (the amount taken) and the interest (the fee charged by the mortgage provider for the advantage of receiving the capital).
There are primarily 2 types of mortgage loans :
A repayment mortgage pays off both the capital and the interest over the duration of the mortgage. If the exact monthly repayments are paid on time, a repayment mortgage promises that the whole of the mortgage loan will be cleared at the close of the loan agreed duration.
An interest only mortgage pays off only the interest on the amount taken out - therefore the "interest only" name. As the principal amount is not repaid monthly in this kind of mortgage, you need to make your own provision to ensure the capital is returned before or at the end of the mortgage term. Standard methods of managing this sort of mortgage are using investments or savings products such as endowment policies or otherwise the principal may be provided by the sale of the house.
Determining which kind of mortgage loan repayment method is the best for you can be determined by your individual financial and employement circumstances.
With a repayment mortgage loan you have the guarantee that your house will be totally reimbursed at the end of the term. However, in the early years of your loan the majority of your monthly payments will in fact be payment of interest rather than capital. If your plan is to move house repeatedly or re-mortgage to secure a better mortgage rate, you can realise that little of the capital amount is reimbursed.
With an interest-only mortgage loan, if your investment plans perform better than anticipated, you could pay off the principal faster than projected, bringing down the length of the loan and as a benefit, reducing the amount of interest paid to the lender. Before deciding about the style of mortgage which is the most suitable for you, we encourage that you contact an independent mortgage advisor.
How much can you take out from a mortgage lender?
Even though there are no set rules as to what ceiling a lender is ready to lend, commonly if you plan to buy a home for yourself, lenders could be willing to lend you about x 3 your gross annual salary, based on your individual situation, such as employment status, your current level of borrowing ,etc…
Before you sign up to an agreement to get a mortgage it is recommended to work on your family budget featuring your different incomes and your monthly outgoings such as utility bills, phone bills, food and clothing costs, ongoing, unsecured loan repayments and any other costs you get every month. As part of this estimate the monthly cost of your new property (including different runing cost / bills and council tax). Be sure to include insurance premiums in your budget home insurance and / or repayment protection. This method will provide you with a good idea of the mortgage you may be able to plausibly afford
How much deposit do lenders want?
Most mortgage companies will lend you no more than 90 percent of the value of your new home, meaning you will be required to provide a ten percent deposit. Nevertheless a small group of mortgage providers will loan you a 100% mortgage but this kind of mortgage is less advantageous and is in some instances a very expensive option to get a mortgage. A good deposit of more than 15%, will give you access to a wider choice of mortgage solutions with a more attractive interest rate
Applying for a mortgage loan with a poor credit rating
A small number of mortgage providers specialise in mortgages for people disadvantaged by a poor credit file (CCJs, defaults, arrears) These mortgage providers are called subprime lenders. They will consider any adverse credit mortgage application (arrears, ccj's). With the higher risk with lending to people with poor credit, these sub-prime mortgage companies charge a higher interest rate on the mortgage.
With an impaired credit rating (CCJs, defaults) you need to consider cautiously about the cost of taking out a subprime mortgage. You need a higher level of deposit of in some cases 20 percent and above.
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