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Getting a good mortgage provider might be a time consuming task. The internet will speed up the application process in most cases. Today an increasing number of mortgage providers have an online representation and can present their mortgage deals over the web. You can use the internet to make contact with lenders to gather further information. The lender's agent will be able to assist you on the right
A basic understanding of a mortgage
In basic terms a mortgage is a monetary lump sum taken to buy real estate, repaid over a defined loan term. The standard repayment period of a mortgage advance is between 20 and 25 years however it can be reduced to tie in with your circumstances.
A mortgage is composed of two definite parts : the capital (the amount borrowed) and the interest (the fee charged by the mortgage company for the benefit of getting the lump sum borrowed).
There are in essence two categories of mortgage loans :
A repayment mortgage product pays back both the capital and the interest of the mortgage over the duration of the mortgage. On the condition that the defined monthly payments are made at the correct time, a repayment mortgage loan assures that the totality of the mortgage amount will be paid at the end of the mortgage period.
An interest only mortgage pays off only the interest on the monetary advance borrowed - for this reason the "interest only" name. As the mortgage capital is not repaid monthly in this kind of mortgage product, you will need to make your own preparation to ensure the capital is reimbursed before or at the end of the mortgage repayment period. Common methods of arranging this sort of mortgage loan are with investments or savings products for example endowment policies (also known as Endowment Mortgages) or instead the capital can be repaid by the resale of other assets.
Establishing which type of loan repayment approach is the best for you can be determined by your individual financial circumstances.
With a repayment mortgage loan you have the assurance that the property will be totally reimbursed at the end of the mortgage. However, in the early years of your loan the majority of your monthly repayments will end up being payment of interest rather than capital repayment. If you have to move house regulary or remortgage to get more flexibility, you can realise that little of the capital amount gets paid off.
With an interest-only mortgage loan, if your savings vehicles perform better that imagined, you can repay the capital faster than expected, reducing the length of the loan and saving money. Before reaching a decision about the type of mortgage which is the most suitable for you, we encourage that you contact a fully qualified financial advisor.
How much can we receive from a mortgage lender?
Even though there are no defined rules as to what level a mortgage lender is willing to lend, in general if you plan to aquire a property as your main place of residence, mortgage providers could lend about x 3.5 your joint gross annual revenue, based on your individual situation, such as number of children you have, your credit rating ,etc…
Before you take up an application to take a mortgage it is advised to draw up a budget featuring your different incomes and your monthly outgoings such as electricity bills, phone bills, food shopping, ongoing, credit card repayments and any ofther bills you have during the month. Within this calculate the cost of a new house (including new utility bills and council tax). Don't forget to add all insurance premiums in your budget home insurance and mortgage protection insurance. This approach will give you a fair idea of the monthly mortgage you might be able to practically afford
How much deposit do mortgage lenders want ?
The greater part of mortgage companies will give you no more than 90% of the purchase value of the house, meaning you will be required to provide a 10% deposit. Nevertheless a small group of mortgage providers will give you a 100% mortgage but this type of lending is less attractive and is in some ways an expensive method to get a loan. A large deposit of 15% or more, will give you a greater variety of mortgage offers, with the most attractive mortgage interest rates
Obtaining a mortgage with a bad credit history
A small group of lenders can offer lending for people with a bad credit record (CCJs, defaults, arrears) These mortgage companies are called subprime lending companies. They will consider any poor credit mortgage applicant (ccj's / arrears). With the greater risk with providing a mortgage to people with impaired credit, these sub prime lenders request an elevated interest (APR) on the mortgage loan.
With a low credit history (defaults, arrears, ccj's) you have to think cautiously about the expense of taking out a sub-prime loan. You need a larger deposit of in some situations 20% and above.
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