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Getting the correct mortgage product can prove to be a gruelling process. The world wide web could smooth the mortgage application process in most cases. Today the great majority of lenders have an online presence and can display their mortgage deals over the internet. You can make use of the internet to make contact with mortgage lenders to compare mortgage products. The mortgage lender's advisor should be able to advise you on the right
A basic understanding of a mortgage
In simple terms a mortgage product is a personal loan given to acquire a home, repaid over a defined amount of time. The typical repayment term of a mortgage is around 25 years but it can be reduced to suit your personal circumstances.
A mortgage is made up of two clear parts : the principal (the lump sum taken) and the interest (the annual fee charged by the mortgage lender for the advantage of getting the principal amount).
There are primarily 2 kinds of mortgage products :
A repayment mortgage pays off both the principal and the interest over the agreed term of the mortgage. Provided that the defined monthly payments are made in good time, a repayment mortgage loan ensures that the whole of the amount borrowed will be settled at the completion of the mortgage agreed period.
An interest only mortgage pays back only the interest on the advance given - therefore the "interest only" name. As the principal mortgage amount is not repaid in this kind of mortgage, you need to make your own provision to assure the principal is covered before or at the end of the mortgage agreed period. Common approaches of arranging this type of mortgage product are through savings or investments plans for instance ISAs or alternatively the capital can be paid by the sale of other assets.
Determining which type of loan repayment method is right for you can be influenced by your individual employment and financial circumstances.
With a repayment mortgage you have the guarantee that your house will be fully reimbursed at the end. On the other hand in the early years of your loan the best part of your repayments will end up being payment of interest rather than capital. If your plan is to move place of residence repeatedly or remortgage to get a more competitive rate, you may find that little of the capital amount gets paid back.
With an interest-only mortgage, if your investments or savings plans perform well, you can reimburse the capital faster than planned, bringing down the duration of mortgage and making a great saving. Before reaching a decision about the kind of mortgage product which is right for you, we advise that you contact a qualified financial advisor.
What amount can we take out from a mortgage lender?
While there are no set rules as to what amount a lender wishes to lend, usually if you plan to purchase a real estate property as your principal residence, mortgage companies could be willing to lend you around up to x 5 your joint gross annual revenue, depending on your individual circumstances, such as number of children you have, your current level of debt ,etc…
Before you take up an application to get a loan it is advised to make your accounts featuring your income and your expenses such as utility bills, phone bills, food and clothing costs, ongoing, car loan repayments and any other costs you have during the month. Within this account for the cost of a new property (including different runing cost / bills and council tax). Make sure to include insurances in your plan buildings insurance and / or mortgage insurance. Your financial budget will present you with a better idea of the mortgage you might be able to afford
How much deposit do mortgage companies require?
Most mortgage companies will give you up to 90 percent of the purchase value of your new property, meaning you will be required to provide a ten percent deposit. However, some mortgage lenders will grant you a 100% mortgage but this type of mortgage is less competitive and is in some cases an expensive method to get a loan. A good deposit of above 15%, will give you a wider choice of mortgage offers, with a more attractive rate
Getting a mortgage with a poor credit history
A minority of mortgage companies specialise in mortgages for borrowers suffering from a bad credit record (CCJs, defaults) These mortgage providers are called subprime lending companies. They will consider any adverse credit mortgage applicant (default, arrears, ccj's). With the greater level of risk involved in providing a mortgage to people with low credit, these sub-prime lenders charge a top level of APR on the advance.
With a low credit record (CCJs, defaults) you ought to think cautiously concerning the cost of getting a poor credit loan. You need to have a larger deposit of no lower than 25% or more.
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