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Searching for a suitable mortgage product can be an arduous task. Access to the internet can end up smooth the mortgage application process in most cases. These days the great majority of mortgage providers have an online web site and can promote their best mortgage offers over the internet. You can make use of the web to contact mortgage lenders to compare mortgage options. The mortgage broker's advisor will be able to assist you on the most suitable
What is a mortgage?
In plain terms a mortgage is a lump sum borrowed to acquire real estate, to be repaid over a set period. The general repayment period of a mortgage loan is around 25 years however it can be adapted to match your individual situation.
A mortgage is made up of two separate elements : the principal (the lump sum borrowed) and the interest (the monthly fee charged by the lender for the advantage of receiving the lump sum borrowed).
There are basically two types of mortgages :
A repayment mortgage pays off both the principal and the interest of the loan over the term of the mortgage. Providing the defined monthly repayments are paid at the correct time, a repayment mortgage product offers the assurance that the whole of the mortgage debt will be paid back at the closing of the mortgage agreed period.
An interest only mortgage repays only the interest on the mortgage taken out - and so the "interest only" name. Due to the fact the principal amount is not repaid in this kind of mortgage product, you must make your own plan to guarantee the principal is covered before or at the end of the mortgage term. Common ways of providing this type of mortgage are via savings products such as endowment policies (also known as Endowment Mortgages) or instead the capital can be provided by the resale of the property.
Knowing which type of mortgage loan repayment approach is the best for you can be determined by your individual financial and employement situation.
With a repayment mortgage you have the assurance that your property will be fully reimbursed at the end of the mortgage. On the other hand in the early years of your loan the best part of your monthly repayments will in fact be payment of interest rather than repayment of the principal amount. If you plan to move place of residence on a regular basis or re-mortgage to benefit from a better interest rate, you could find that little of the capital is reimbursed.
With an interest-only mortgage, if your savings or investments plans perform better than anticipated, you can pay off the principal quicker than anticipated, lessening the term of mortgage and saving money. Before deciding about the style of mortgage which is right for you, we encourage that you get in touch with a fully qualified financial advisor.
How much can you obtain from a mortgage lender?
In spite of the fact that there are no defined guidelines as to what ceiling a provider is prepared to lend, commonly if you plan to purchase a house for yourself, lenders may be willing to lend you about 3.5 times your joint annual income, depending on your personal situation, such as number of children you have, your credit rating ,etc…
Before you take up an application to borrow money it is advised to work on a budget detailing your income and your monthly spending such as electricity bills, phone and mobile bills, food and clothing costs, existing, personal loan repayments and any ofther bills you get during the month. Within this account for the cost of your new property (including new runing cost / bills and taxes). Make sure to add insurance premiums in your calculation house insurance and / or mortgage protection insurance. Your budget will provide you with a good idea of how much you have the capacity to afford
What amount of deposit do mortgage companies want?
The majority of mortgage companies will grant you no more than 90% of the current value of your prospective home, meaning you will be required to provide a 10% deposit. On the other hand, a small group of mortgage lenders will offer you a 100% mortgage but this type of loan is less attractive and is in some ways a very expensive option to get a mortgage loan. A good deposit of above 15%, will provide you a bigger choice of mortgage opportunities with a more competitive interest rate
Taking a mortgage with a poor credit rating
A small group of mortgage lenders can offer mortgages for people with a poor credit record (CCJs, defaults) These mortgage providers are called sub-prime lenders. They will review any poor credit applicant (CCJs, defaults). Due to the greater risk with providing a loan to applicants with poor credit, these sub prime mortgage lenders request a top APR on the loan.
With a low credit history (CCJs, defaults, arrears) you need to think carefully about the cost of taking out a poor credit mortgage loan. You will be required to have a larger deposit of at least 20 percent and above.
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