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Looking for the right mortgage can be a testing process. The world wide web could improve the experience in the majority of cases. At the present time an increasing number of mortgage lenders have an internet presence and can introduce their mortgage benefits over the web. You can take advantage of the internet to get through to mortgage intermediaries to ask for further information. The mortgage provider's advisor will be able to advise you on a suitable
A basic mortgage definition
In plain terms a mortgage is a loan arranged to acquire a property, repaid over a specified period. The ordinary repayment period of a mortgage is around 25 years but it can be reduced to go with your individual circumstances.
A mortgage is composed of two distinct elements : the principal (the amount borrowed) and the interest (the fee charged by the mortgage provider for the benefit of taking out the principal amount).
There are essentially 2 kinds of mortgages :
A repayment mortgage loan pays back both the capital and the interest of the loan over the agreed term of the mortgage. As long as the agreed monthly payments are made regulary and on time, a repayment mortgage loan warrants that the full amount of the mortgage amount will be repaid at the closing of the mortgage period.
An interest only mortgage pays off only the interest on the amount given - hence the "interest only" name. As the principal mortgage amount is not reimbursed monthly in this kind of mortgage product, you are responsible to make your own arrangements to assure the principal is returned before or at the end of the mortgage repayment period. Popular ways of organising this type of mortgage loan are by the use of savings or investments plans for instance pension plans or the capital can be reimbursed by the sale of the real estate.
Establishing which kind of loan repayment approach is most suited to you is determined by your individual employment and financial situation.
With a repayment mortgage product you have the peace of mind that your home will be fully reimbursed at the end. However, at the beginning of your mortgage the greater part of your monthly payments will be payment of interest rather than capital repayment. If you plan to move home on a regular basis or re-mortgage to get a better mortgage deal, you may realise that little of the principal gets paid off.
With an interest-only mortgage, if your investments or savings plans perform well, you can pay off the principal sooner than anticipated, slashing the duration of the loan and as a result saving money on interest. Prior to reaching a decision about the type of mortgage which is the most suitable for you, we recommend that you get in touch with a fully trained financial advisor.
What amount can we borrow from a mortgage lender?
While there are no defined rules as to what amount a mortgage provider is prepared to lend, normally if you want to purchase a property for you and your family as your principal residence, mortgage lenders may lend you around 3 times your gross annual salary, depending on your personal situation, such as employment status, your current level of debt ,etc…
Before you proceed with signing for a mortgage it is recommended to work on your accounts detailing the amount you take home and your expenses such as gas and electricity bills, telecom bills, transport costs, existing, loan repayments and any other costs you have every month. As part of this calculate the monthly cost of your new property (including new runing cost / bills and taxes). Make sure to add insurance costs in your calculation life insurance and / or repayment protection insurance. Your budget will give you a fair idea of the monthly mortgage you might be able to sensibly afford
What amount of deposit do we need?
The best part of building societies will give you up to 90 percent of the current value of your intended property, meaning you will be required to have a 10% deposit. Nevertheless some mortgage lenders will loan you up to 100% but this sort of mortgage is less competitive and is in some instances an expensive option to get a mortgage. A decent deposit of 15% and above, will present you with a wider range of mortgage opportunities with a more attractive mortgage rate
Applying for a mortgage loan with a bad credit rating
A small number of mortgage providers offer lending for borrowers with a low credit record (CCJs, defaults) These mortgage providers are called sub-prime lenders. They will consider any adverse credit mortgage applicant (arrears, ccj's). Due to the larger risk involved in providing a mortgage to people with bad credit, these subprime mortgage lenders charge a superior APR on the advance.
With an adverse credit history (CCJs, defaults, arrears) you have got to consider cautiously concerning the cost of taking out a sub prime mortgage loan. You will need a larger deposit of no smaller than 20% or more.
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