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Looking for a good mortgage provider may prove to be a challenging task. Access to the internet could end up simplify the mortgage application process in most cases. At the present time an increasing number of lenders have an internet presence and can present their mortgage services over the web. Take advantage of the internet to get through to mortgage providers to request a personalised quote. The mortgage intermediary's advisor should be able to help you on the most suitable
What is a mortgage?
In plain terms a mortgage is a monetary lump sum arranged to buy real estate, repaid over a specified amount of time. The ordinary repayment term of a mortgage advance is twenty five years but it can be revised to meet your personal circumstances.
A mortgage is made up of two distinct elements : the principal (the amount received) and the interest (the annual fee charged by the mortgage lender for the advantage of getting the amount borrowed).
There are essentially two types of mortgages :
A repayment mortgage loan pays back both the principal and the interest of the loan during the term of the mortgage. On the condition that the agreed monthly payments are met at the correct time, a repayment mortgage loan promises that the full amount of the amount borrowed will be cleared at the closing stage of the mortgage agreed duration.
An interest only mortgage repays only the interest on the monetary advance given - therefore the "interest only" name. As the mortgage capital is not regulary repaid in this kind of mortgage product, you need to make your own plan to assure the principal is returned before or at the end of the mortgage agreed term. Popular methods of managing this style of mortgage capital are by means of investments or savings plans for instance pension policies or the principal may be paid by the resale of other assets.
Determining which type of mortgage loan repayment method is most suited to you depends on your personal financial circumstances.
With a repayment mortgage product you benefit from the peace of mind that your property will be totally reimbursed at the end of the loan. Yet in the early years of your loan the bulk of your mortgage payments will in fact be payment of interest rather than the principal amount. If your plan is to move place of residence regulary or re-mortgage to benefit from a better rate, you can realise that a small percentage of the principal is repaid.
With an interest-only mortgage, if your savings or investments plans perform better than anticipated, you could repay the principal quicker than projected, cutting down 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 kind of mortgage product which is best for you, we suggest that you speak to a fully qualified mortgage advisor.
How much can you obtain from a mortgage company?
Although there are no defined definitions as to what level a mortgage provider is willing to lend, usually if you plan to aquire a property as your principal residence, mortgage providers could lend around a maximum of 5 times your joint gross annual salaries, depending on your individual situation, such as employment status, your credit rating ,etc…
Before you enter an agreement to get a loan you are advised to work on your family budget detailing the amount you take home and your monthly outgoings such as gas and electricity bills, phone and mobile bills, the cost of your car, existing, credit card repayments and any other costs you have every month. As part of this estimate the cost of your new home (including new runing cost / bills and taxes). Don't forget to add insurances in your calculation life insurance and mortgage protection insurance. Your budget will give you a reasonable idea of the monthly mortgage you have the capacity to realistically afford
How much deposit do mortgage lenders want ?
The greater part of mortgage companies will give you a maximum of 90% of the current value of the property, meaning you will need a ten percent deposit. However, a small number of mortgage companies will give you a 100% mortgage but this kind of mortgage loan is less attractive and is in some ways an expensive way to get a mortgage. A larger deposit of 15% or more, will present you with a large choice of mortgage prospects with a more attractive rate
Obtaining a mortgage with a low credit rating
Some lenders can arrange mortgage loans for borrowers disadvantaged by a poor credit record (CCJs, defaults) These mortgage companies are called sub prime lending companies. They will review any poor credit mortgage application (CCJs, defaults). Based on the higher level of risk with lending to people with low credit, these sub-prime mortgage providers request a higher level of interest rate on the mortgage.
With an impaired credit rating (defaults, arrears, ccj's) you have to reflect thoroughly regarding the cost of taking out a bad credit mortgage. You need a higher level of deposit of in some instances 20% or more.
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