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Searching for a good mortgage product may prove to be a complicated process. Access to the web could simplify the task in the majority of cases. Nowadays the vast majority of mortgage brokers have an internet presence and can publish their mortgage offers over the internet. Take advantage of the web to speak to mortgage brokers to get assistance. The mortgage company's agent should be able to help you on the best
A basic understanding of a mortgage
In plain terms a mortgage is an advance organised to purchase a house, to be repaid over a defined loan term. The general term of a mortgage advance is around 25 years however it can be varied to meet your individual circumstances.
A mortgage is made up of two noticeable elements : the capital (the amount received) and the interest (the monthly fee charged by the mortgage lender for the advantage of receiving the lump sum borrowed).
There are fundamentally two types of mortgage loans :
A repayment mortgage loan pays off both the principal and the interest of the loan during the period of the mortgage. Assuming that the agreed monthly payments are made regulary and on time, a repayment mortgage guarantees that the entirety of the mortgage debt will be paid off at the close of the loan agreed duration.
An interest only mortgage repays only the interest on the advance borrowed - and so the "interest only" name. As the mortgage capital is not regulary repaid in this kind of mortgage product, you need to make your own arrangements to guarantee the principal is paid before or at the end of the mortgage agreed term. Common methods of providing this sort of mortgage loan are through investments or savings plans such as ISAs or otherwise the capital could be provided by an inheritance.
Establishing which type of loan repayment approach is right for you is subject to your personal financial and employement situation.
With a repayment mortgage you have the assurance that your home will be fully repaid at the end of the term. However, in the early stages of your mortgage the greater part of your repayments will end up being payment of interest rather than capital. If you have to move home regulary or remortgage to get a better mortgage deal, you may realise that little of the capital is repaid.
With an interest-only mortgage loan, if your investments or savings vehicles perform better than expected, you can repay the capital sooner than planned, bringing down the borrowing terms of the loan and making a great saving. Before deciding about the style of mortgage product which is the most suitable for you, we recommend that you speak to a qualified financial advisor.
What amount can you borrow from a mortgage company?
While there are no defined guidelines as to how much a mortgage company is prepared to lend, generally if you want to buy a real estate property as your principal residence, mortgage companies could lend around up to x 5 your joint gross annual income, based on your individual circumstances, such as employment status, your current level of borrowing ,etc…
Before you proceed with signing to get a mortgage it is advised to work on your accounts itemising your income and your outgoings such as gas and electricity bills, phone bills, transport costs, current, car loan repayments and any ofther bills you get during the month. Within this estimate the cost of a new property (including different runing cost / bills and council tax). Make sure to add insurance costs in your plan contents insurance and mortgage insurance. This method will provide you with a good idea of the repayment you are able to afford
How much deposit do mortgage companies want?
The best part of mortgage lenders will grant you up to 90% of the purchase price of your prospective home, meaning you will be required to provide a 10% deposit. Nevertheless a small number of mortgage providers will advance you a 100% mortgage but this sort of lending is less attractive and is in some instances an expensive solution to get a loan. A larger deposit of more than 25%, will give you access to a wider variety of mortgage solutions with a more attractive mortgage rate
Applying for a mortgage loan with a poor credit file
A minority of mortgage providers can offer lending for people with a impaired credit rating (arrears, ccj's) These mortgage companies are called sub prime lenders. They will review any poor credit mortgage applicant (default, arrears, ccj's). Due to the bigger level of risk with offering a loan to applicants with poor credit, these sub prime mortgage lenders charge an elevated level of interest rate on the advance.
With a poor credit record (defaults, arrears, ccj's) you have got to think carefully about the cost of applying for a sub-prime mortgage loan. You need to have a larger deposit of no less than 25percent and above.
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