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Looking for a suitable mortgage can prove to be a time consuming process. The world wide web could end up facilitate the process in most cases. At the present time most mortgage companies have an online presence and can present their mortgage services over the internet. You can make use of the web to contact lenders to get mortgage advice. The mortgage lender's agent will be able to help you on the best
What is a mortgage?
In simple terms a mortgage is a monetary advance taken to buy a home, to be repaid over an agreed loan term. The general term of a mortgage advance is up to 25 years but it can be adapted to tie in with your situation.
A mortgage is composed of two defined elements : the principal (the lump sum borrowed) and the interest (the monthly fee charged by the mortgage company for the advantage of receiving the lump sum borrowed).
There are in effect 2 categories of mortgage products :
A repayment mortgage product pays back both the capital and the interest of the mortgage over the term of the mortgage. On the condition that the defined monthly payments are paid at the correct time, a repayment mortgage guarantees that the totality of the mortgage loan will be paid at the close of the loan term.
An interest only mortgage pays back only the interest on the lump sum borrowed - hence the "interest only" name. As the capital is not repaid in this type of mortgage loan, you have to make your own arrangements to assure the capital is covered before or at the end of the mortgage repayment period. Popular ways of organising this type of mortgage are through savings plans such as endowment policies (also known as Endowment Mortgages) or instead the principal can be repaid by the sale of the real estate.
Knowing which type of mortgage repayment approach is most appropriated can be determined by your individual financial situation.
With a repayment mortgage product you benefit from the guarantee that your house will be totally reimbursed at the end of the loan. However, in the early stages of your loan most of your repayments will in fact be payment of interest rather than repayment of the principal amount. If you have to move home repeatedly or re-mortgage to secure a better mortgage rate, you may find that little of the principal is repaid.
With an interest-only mortgage loan, if your savings vehicles perform well, you could pay off the capital quicker than projected, lessening the borrowing terms of mortgage and as a benefit, reducing the amount of interest paid to the lender. Ahead of deciding about the style of mortgage which is right for you, we suggest that you speak to a fully qualified financial advisor.
How much can you receive from a mortgage lender?
In spite of the fact that there are no defined definitions as to what amount a mortgage provider is ready to lend, commonly if you want to purchase a real estate property as your principal residence, lenders could be willing to lend you around x 3 your joint gross annual income, depending on your personal circumstances, such as employment status, your current level of debt ,etc…
Before you take up an application to take a mortgage it is advised to draw up your budget itemising your different incomes and your bills such as gas and electricity bills, telecom bills, food shopping, ongoing, loan repayments and any other costs you have every month. As part of this budget for the cost of a new property (including new utility bills and council tax). Be sure to add all insurance premiums in your budget home insurance and / or repayment protection insurance. Your budget will provide you with a fair idea of the monthly mortgage you could practically afford
What amount of deposit do mortgage companies require?
Most mortgage providers will give you a maximum of 90% of the current value of your intended property, meaning you will be required to have a ten percent deposit. On the other hand, some mortgage companies will give you a 100% mortgage but this kind of mortgage is less advantageous and is in some cases an expensive option to get a loan. A large deposit of above 15%, will give you access to a bigger range of mortgage opportunities with a more competitive rate
Applying for a mortgage loan with a poor credit file
A minority of mortgage lenders offer mortgages for people suffering from a low credit record (arrears, ccj's) These lenders are called subprime lending companies. They will consider any low credit application (ccj's / arrears). With the bigger level of risk involved in lending to people with bad credit, these sub-prime mortgage lenders request a top interest (APR) on the loan.
With a low credit history (CCJs, defaults) you should reflect carefully regarding the expense of taking out a sub-prime mortgage. You will need a higher level of deposit of in some cases 20 percent and above.
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