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MORTGAGES

We recommend the services of only the most reputable, local expert mortgage advisers who are available to talk to you about your mortgage needs and guide you through the process.

Buying a home is the largest purchase you’re likely to make. So it is so important to choose the right mortgage for you.   Sometimes it’s not just about the maximum you can borrow, but the best mortgage for your circumstances, you need to make sure you know what you can afford to borrow.

Our Mortgage Advisors can help you find out where to get a mortgage, the different types and how the process works.  

Please contact our office and we can put you in touch with a local Mortgage Advisor

If you are a First Time Buyer perhaps our simple Mortgage Quick Guide might be of some interest…

So, what is a mortgage?

A mortgage is a loan taken out to buy a property (or land). Most run for 25 years but the term can be shorter or even longer.

The loan is ‘secured’ against the value of your home until it’s paid off. If you can’t keep up your repayments the lender can repossess (take back) your home and sell it, so they can get their money back.

Working out the best one for you

You don’t want to stretch yourself if you think you’ll struggle to keep up repayments, and also think about all the ongoing costs of owning a home such as the household bills, council tax, insurance and maintenance, etc.

Plus Lenders will want to see proof of your income and certain expenditures, and if you have any debts. They may ask for information about household bills, personal expenses and even any child maintenance. Lenders want proof that you will be able to keep up repayments if interest rates rise. They may refuse to offer you a mortgage if they don’t think you’ll be able to afford it.

Where to apply for a mortgage

You can apply for a mortgage directly from a bank or building society, choosing from their (sometimes limited) product range, or you can use a mortgage broker or independent financial adviser (IFA) who can compare the different mortgages on the market, as well as mortgages which are not offered directly to customers.

Some Mortgage Advisers look at mortgages from the ‘whole market’ while others look at mortgages from a smaller number of lenders, plus some charge.  They should tell you this when you first contact them.

The Deposit

The more deposit you have, the lower the loans interest rate could be. You may hear the term ‘Loan to Value’, this is the amount of mortgage (secured against the property) compared to the Deposit you put down.

e.g A £25,000 deposit on a £250,000 property, represents a deposit of 10% of the price of the property, and the Loan to Value (LTV) is the remaining 90%. The mortgage is secured against this 90% portion.

The lower the LTV, the lower your interest rate is likely to be. This is because the lender is taking less risk with a smaller loan.   So the higher the deposit, the smaller the mortgage and the smaller the mortgage, the less risk the Lender is taking.

This all said, don’t just focus on the interest rate and any fees the mortgage advisor may charge, you also need to consider what type of mortgage is best for you.

Under reassuring new rules introduced in April 2014, lenders and mortgage advisors must offer advice by recommending the most suitable mortgage for you. They will assess the level of mortgage repayments you can afford, by taking into account your income as well as your debt repayments and various outgoings.

The two main types of Mortgage

  • Fixed rate – the interest stays the same for a number of years, typically between two to five years
  • Variable rate – the interest you pay can change

Fixed rate mortgages

The interest rate will stay the same throughout the length of the deal no matter what happens to interest rates. You’ll see them advertised as ‘two-year fix’ or ‘five-year fix’, for example, along with the interest rate charged for that period.   After the deal ends, it normally reverts to the lenders standard Variable Rate.

Watch out for charges if you want to leave the deal early – you are tied in for the length of the fix!

Standard variable rate mortgages

This is the normal interest rate your mortgage lender charges and it will last as long as the mortgage.   Changes in the interest rate may occur after a rise or fall in the base rate set by the Bank of England.

Tracker mortgages

Tracker mortgages normally move in line with the Bank of England’s base rate plus a few percent. So if the base rate goes up by 0.5%, your rate will go up by the same amount.

Usually they have a short life, typically two to five years, though some lenders offer trackers which last for the life of your mortgage or until you switch to another deal.

Like the Fixed Mortgages, watch out for charges if you want to leave the deal

Capped rate mortgages

The rate moves in line normally with the lender’s standard variable rate but the ‘cap’ means the rate can’t rise above a certain level.

Offset mortgages

These work by linking your savings and current account to your mortgage, so that you only pay interest on the difference.   You still repay your mortgage every month as usual, but your savings act as an overpayment which helps to clear your mortgage early

Something else to bear in mind…

When applying for a Mortgage, you will need to decide what type of Survey to have done on the property you are buying.   Our chart below offers an overview to help you decide.

Lender’s Valuation reportHomeBuyers ReportBuilding Survey
Type of property this survey is suitable for:All – most mortgage lenders require a simple valuation. Sometimes the valuer does not enter the property.Straight forward properties in a reasonable conditionAny property can have a Building Survey, but they are recommended particularly for:
Type of examinationPartial assessment, adequate for the lender’s needsMid price, mid range service using a standard format to bring major or urgent problems to your attention.You receive a thorough report that is tailored to your needs.
Why have this survey?To value the property so the lender knows they can recoup their costs. This report will not necessary disclose defects to you.To provide an informed judgement allowing decision on whether to buy the property. To show whether the property is reasonably priced.To outline actions necessary/to be agreed prior to exchange of contractsTo provide a detailed report on the condition and construction of the property. Highlights faults and outlines necessary repairs. Advice for future plans for extension/repairs or alterations to the property
Other aspects of this survey-Highlights urgent and major problemsDetails the property’s construction, materials used major AND minor faults and remedial costs.
Valuation proposed?YesYesNo, but usually available as optional extra
Format of the reportIn some cases, the lender will release basic details where a valuation inspection has been undertakenStandard RICS formatPresented in the surveyor’s own format.

Once you’ve found a mortgage you like, agree a mortgage ‘in principle’.

This confirms how much money the lender is likely to offer and the interest rate you will pay.

You may have to pay a booking fee to reserve the mortgage product you want depending on lender and type of mortgage you are obtaining.

Getting an ‘Agreement in Principle’ as soon as you are ready to buy has many advantages:

  • You know you have the money for the purchase in the first place
  • It gives the sellers and their estate agents confidence that your offer is credible and that obtaining the finance to by the property is viable.
  • It can put you in a stronger negotiating position – All other things being equal, the seller will be more likely to accept your offer over somebody who doesn’t have a decision in principle in place.

So, no time like the present, give us a ring or send a quick email and we’ll put you in touch with an Advisor straight away!

01277 500800    office@hentonkirkman.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.
Henton Kirkman

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