[vc_row][vc_column width=”1/1″][vc_column_text]Just a few of the more commonly asked questions about mortgages, for further information please get in touch – remember we give our initial consultation absolutely free of charge.
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In basic terms, you take out a mortgage from a mortgage lender as a long term loan to make payments on a property.
The mortgage lender has the option of taking possession of the property and selling it on if the mortgage repayments aren’t made. This is so that the lender doesn’t lose money as they would be making it back from the property sale.
Any time you take out a mortgage, the loan is then split into two aspects. One of which is the interest , which is what the lender charges for lending the money. The other is the capital, which is the actual amount of money used to purchase the property.
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One thing that applies to almost all types of UK mortgage is whether you should choose a fixed rate mortgage or one with a variable interest rate.
The best choice depends on your own circumstances and to an extent on interest rate levels at the time, but things to consider are:
- Can you afford to have your payments go up each month? This could happen with a variable rate mortgage.
- Are rates generally low at the moment? It could be a good time to get tied into a fixed rate mortgage.
- Do you want the security of a fixed monthly payment for several years? Fixed rate periods from 1 – 10 years are available.
- Are you having difficulty borrowing enough money? An interest only mortgage can mean lower monthly repayments ie you can borrow more against your salary. But there are drawbacks
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There is a general rule of thumb that you can borrow around three and a half times the amount you earn annually. The actual figures differ between different mortgage lenders although there are some typical variables to expect:
Couple 1: Up to two and a half times the annual income of both people
Couple 2: Up to three and a half times what the greater income is of the two and one year of the remaining income.
Some lenders will now use more sophisticated credit scoring methods whereby they compare your income with your outgoings. The reason for this is that each prospective borrower will have unique circumstances.
For example, a single person would generally be able to borrow more than a person with two teenage children and a lot of outgoings on the same salary.
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[toggle title_open=”What is remortgaging?” title_closed=”What is remortgaging?” hide=”yes” include_excerpt_html=”yes”]It’s important to understand that remortgaging isn’t the process of purchases a new property but rather switching your mortgage to another provider that offers lower repayments, saving you money. If your home has risen in value, this is particularly relevant. [/toggle]
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Conveyancing refers to the legal work required when buying or selling a property. Generally, it is done by either a licensed conveyancer or a solicitor.
It’s important to have either a conveyancer or a solicitor already lined up because as a buyer, you will need this for the sellers. As soon as your offer is accepted, the sellers, vendors or Estate Agents will immediately contact them.
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If you’re employed: The lender will ask for written evidence e.g. payslips and/or your P60 for the past two years.
They’ll also probably write to your employer asking for confirmation.
Some lenders may accept income that’s not guaranteed e.g. commission, bonuses etc., though this would be exceptional.
If you’re self-employed: Traditionally this was more difficult and as a result there are lenders who specialise in the self-employed.
However nowadays any lender should be interested in you. You would need to show three years audited accounts. If you haven’t been in business long enough then the lender should accept a letter of confirmation from your accountant
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The answer is usually 25 years. But this is only because that was the traditional length.
You can get a mortgage for any length. 15 or 20 year mortgages are fairly common.
The reason why people would want a shorter mortgage term is that – despite seeming to be more expensive, i.e. the monthly payments are higher – at the end of the day you’d be paying a lot less interest over the length of the mortgage.
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This is a conditional offer made by a mortgage lender that – provided the information you give them is correct – they will “in principle” give you the loan you have discussed with them.
It’s very useful to have one before you even start looking for a house to give you the edge over any competition. Having one means you should be able get the actual mortgage quicker when the race to buy your chosen home begins.
Knowing what you can afford will help you narrow your search. You can get this offer in writing to show to Estate Agents and sellers who will see you as a serious prospect and not a timewaster who’s interested, for example, in looking around peoples’ homes for a laugh.
To get a mortgage in principle you have to go through the same motions as an actual mortgage, ie consider what type of mortgage you want and then find a mortgage lender you feel can offer you the best deal.
You should be able to get a mortgage in principle offered over the phone. It’s only when applying for the actual mortgage that the mortgage lender will want to see the proof of your pay etc.
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[toggle title_open=”How can I check my credit rating?” title_closed=”How can I check my credit rating?” hide=”yes” include_excerpt_html=”yes”]For £2 you can get details of the credit files held on you by either of the two credit reference agencies, Experian and Equifax.
If the information on your file is wrong, or if you would like to add a note of explanation, Either of them will add an agreed statement to your file.
Experian, PO Box 8000, Nottingham NG1 5GX
Equifax Europe, Department 1E, PO Box 3001, Glasgow G81 2DT.
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