A mortgage is a type of loan that a bank or building society lends to you to help you buy a property. The amount of mortgage you need to borrow will depend on the amount you’ve saved up to put towards a deposit for a property, and the amount you still need to reach the purchase price of the property you want to buy. The amount of mortgage you then take out will be a percentage of the purchase price, this is called a loan-to-value or LTV.
When you are ready to apply for a mortgage you’ll need a few documents to hand, including proof of identity, utility bills and bank statements. When you apply we'll ask you a series of questions about yourself and your finances, so we can calculate what kind of mortgage you’ll be able to afford. Lenders run a number of checks to determine your financial status, and if your application is accepted you’ll be sent an offer.
It's easier and quicker for us to find the best mortgage for you. Just tell us a little about yourself and the home you want to purchase, and we can compare deals by the initial interest rate, overall APR and the fees included in the overall mortgage term.
The amount of mortgage you can afford is based on your yearly income and any financial commitments you already have.
You can find out how much you could borrow by simply telling us about your yearly income and financial commitments, and we’ll do the rest.
Whether a lender will let you borrow this amount though will also depend on your credit history, deposit amount and mortgage term.
Mortgage rates are the rate of interest charged on a mortgage. They are determined by the lender in most cases, and can be either fixed, where they remain the same for the term of the mortgage, or variable, where they fluctuate with a benchmark interest rate.
Before you compare mortgage rates, you first need to understand the different types and how they work.
Mortgage term: We will recommend a mortgage term that suits your monthly mortgage budget. With a longer term, your repayments will be lower but it will take you longer to pay off the debt. The shorter the term, the sooner you'll be mortgage free. So the shortest term with the most affordable fee is often a better option.
Deal length: given that most mortgage products have an early repayment charge (ERC) if you end the mortgage deal early, it’s important to think about how long you’re happy to tie yourself in for. For example, if you think you might move in the next few years, we may advise a two or three year product rather than locking into a five year product. It can cost thousands of pounds to get out of a mortgage early as the penalty is usually a percentage of the outstanding mortgage.
Repayment or interest-only: you can take your mortgage out on a repayment basis or interest-only.
With a repayment mortgage your monthly payments are calculated so you're paying some of the capital off as well as the interest and will have repaid the entire loan by the end of the term.
Monthly payments on an interest-only mortgage, on the other hand, just cover the interest, which means you'll have the original loan to pay in full at the end of the term. The idea is that you have a repayment plan in place, such as ISA investments, so you’ve built up the lump sum you need by the time your mortgage ends.
A mortgage in principle or an agreement in principle is confirmation of how much a bank or building society would be prepared to lend you, based on the information you’ve given us. This can help show that you’re ready to buy when it comes to making an offer on a place. It is important to remember though that a mortgage in principle is not a guarantee that a lender will let you borrow that much, and they can still decide not to lend to you when you come to make a full mortgage application. This is because a full mortgage application also looks at your full credit history and financial situation.
Many mortgages are portable, so in theory you can take your existing deal with you when you move. However, it’s unlikely that the mortgage on your new house will be identical to the one on your existing home.
Unless you're downsizing, you'll probably need to borrow an additional amount. This is possible, but it is likely to be at a different rate than you're paying on the existing mortgage.
You’ll also need to go through the same affordability and credit checks you went through to get your current mortgage deal to make sure you could afford to borrow more. There will also be some mortgage fees you’ll need to pay when moving house, including legal fees and stamp duty.
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