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Looking for the correct mortgage broker can be a tiring process. Access to the internet will end up smooth the mortgage process in most cases. Currently an increasing number of mortgage lenders have an online representation and can display their typical mortgage rates over the internet. You can make use of the web to speak to mortgage providers to get specific quotes. The mortgage company's representative will be able to assist you on a suitable
What is a mortgage?
In simple terms a mortgage is a loan made available to pay for a house, to be repaid over an agreed term. The normal repayment period of a mortgage is up to 25 years but it can be modified to suit your situation.
A mortgage is made up of two definite components : the capital (the lump sum received) and the interest (the fee charged by the lender for the benefit of getting the amount borrowed).
There are fundamentally two types of mortgage products :
A repayment mortgage pays off both the principal and the interest of the mortgage during the life of the mortgage. Providing the defined monthly repayments are paid regulary and on time, a repayment mortgage loan assures that the full amount of the mortgage loan will be paid back at the closing stage of the loan agreed term.
An interest only mortgage repays only the interest on the advance taken out - therefore the "interest only" name. As the principal amount is not repaid in this sort of mortgage loan, you must make your own arrangements to guarantee the principal is paid back before or at the end of the mortgage agreed period. Popular methods of providing this sort of mortgage are by the use of savings plans for instance endowment policies (also known as Endowment Mortgages) or instead the capital can be provided by the sale of other assets.
Knowing which kind of mortgage loan repayment method is most suited to you is subject to your personal financial and employement situation.
With a repayment mortgage product you benefit from the guarantee that your house will be totally repaid at the end of the mortgage. Still in the early stages of your mortgage the best part of your monthly repayments will end up being payment of interest rather than capital. If you plan to move place of residence repeatedly or remortgage to get a better rate, you can discover that a small amount of the capital gets paid off.
With an interest-only mortgage product, if your investments or savings vehicles perform better that imagined, you could reimburse the principal sooner than planned, reducing the length of mortgage and as a result saving money on interest. Before deciding about the sort of mortgage product which is best for you, we suggest that you contact a fully trained financial advisor.
How much can you borrow from a mortgage company?
Whilst there are no defined guidelines as to what level a provider is ready to lend, usually if you plan to buy a real estate property as your main place of residence, lenders could be willing to lend you about x 3.5 your annual income, depending on your individual situation, such as employment status, your current level of borrowing ,etc…
Before you proceed with an application to get a loan you are advised to work on your budget detailing your salary and your bills such as gas and electricity bills, phone and mobile bills, food and clothing costs, existing, unsecured loan repayments and any other costs you have every month. As part of this calculate the monthly cost of a new property (including different runing cost / bills and council tax). Don't forget to add all insurances in your calculation buildings insurance and repayment protection insurance. This method will give you a better idea of the mortgage repayment you may be able to reasonably afford
How much deposit do mortgage lenders require ?
The majority of mortgage companies will advance you no more than 90 percent of the current value of your new house, meaning you will need a ten percent deposit. On the other hand, a small number of lenders will grant you a 100% mortgage but this type of lending is less competitive and is in some cases a very expensive way to get a mortgage. A larger deposit of above 25%, will present you with a greater variety of mortgage solutions with a more attractive rate
Obtaining a mortgage loan with a low credit rating
Some mortgage lenders specialise in lending for applicants suffering from a low credit record (CCJs) These mortgage providers are called sub prime lenders. They will consider any impaired credit mortgage applicant (ccj's / arrears). With the higher level of risk with offering a loan to applicants with poor credit, these sub prime mortgage companies charge a higher level of APR on the mortgage loan.
With an impaired credit rating (arrears, ccj's) you have got to consider carefully regarding the cost of getting a poor credit loan. You need a larger deposit of no smaller than 25percent and above.
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