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Getting the correct mortgage lender may be a gruelling process. The internet could facilitate the process in most cases. At the present time most mortgage providers have an internet presence and can publish their best mortgage offers over the internet. You can use the web to get in touch with mortgage providers to gather further information. The mortgage lender's agent will be able to assist you on the right
Mortgage basics
In basic terms a mortgage is a loan borrowed to buy real estate, paid back over an agreed loan term. The standard repayment period of a mortgage advance is around 25 years however it can be revised to go with your personal circumstances.
A mortgage is made up of two separate elements : the capital (the lump sum received) and the interest (the monthly fee charged by the lender for the benefit of taking out the lump sum borrowed).
There are primarily two categories of mortgage loans :
A repayment mortgage repays both the capital and the interest of the loan over the term of the mortgage. Given that the defined monthly repayments are met regulary and on time, a repayment mortgage offers the assurance that the whole of the mortgage debt will be repaid at the end of the mortgage agreed period.
An interest only mortgage pays back only the interest on the monetary advance borrowed - therefore the "interest only" name. Since the principal amount is not reimbursed in this sort of mortgage, you must make your own provision to ensure the capital is paid back before or at the end of the mortgage term. Popular ways of managing this type of mortgage loan are via savings or investments products for example pension plans or alternatively the principal could be reimbursed by an inheritance.
Establishing which type of loan repayment approach is most suited to you depends on your individual financial and employement circumstances.
With a repayment mortgage loan you have the assurance that your home will be fully repaid at the end of the mortgage. Still at the beginning of your mortgage the majority of your monthly payments will end up being payment of interest rather than capital repayment. If you plan to move place of residence on a regular basis or remortgage to get a better mortgage deal, you may find that little of the capital is reimbursed.
With an interest-only mortgage product, if your investments or savings vehicles perform better than anticipated, you can reimburse the capital sooner than expected, reducing the borrowing terms of mortgage and as a benefit, reducing the amount of interest paid to the lender. Prior to making a decision about the sort of mortgage product which is the most suitable for you, we recommend that you contact a qualified mortgage advisor.
How much can we borrow from a mortgage lender?
Despite the fact that there are no exact guidelines as to what ceiling a mortgage provider wishes to lend, normally if you plan to aquire a house as your principal residence, mortgage providers could lend about a maximum of 5 times your annual income, based on your personal situation, such as number of children you have, your credit history ,etc…
Before you proceed with an application for a mortgage you should to make your accounts detailing your income and your monthly outgoings such as utility bills, phone bills, food shopping, existing, unsecured loan repayments and any ofther bills you have each month. As part of this account for the monthly cost of a new house (including different runing cost / bills and council tax). Make sure to include insurances in your budget house insurance and / or repayment protection insurance. This approach will present you with a fair idea of the amount you might be able to plausibly afford
How much deposit do I need?
The best part of mortgage providers will offer you a maximum of 90 percent of the purchase price of your new house, meaning you will need a ten percent deposit. However, a small group of mortgage lenders will lend you up to 100% but this kind of mortgage loan is less competitive and is in some instances an expensive way to get a mortgage. A bigger deposit of above 15%, will give you access to a large variety of mortgage offers, with the most attractive mortgage interest rates
Applying for a mortgage with a low credit file
A small number of lenders provide mortgage loans for borrowers with a low credit record (CCJs) These lenders are called sub-prime lending companies. They will consider any poor credit applicant (CCJs, defaults). Due to the bigger risk involved in lending to applicants with impaired credit, these subprime mortgage companies charge an elevated level of interest (APR) on the mortgage loan.
With a poor credit rating (defaults, arrears, ccj's) you need to think cautiously regarding the cost of applying for a sub-prime mortgage. You need to secure a higher level of deposit of in some instances 25% or more.
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