A Beginner’s Guide To Mortgages
Purchasing a home is probably the largest investment that you’re ever going to make. Before making arrangements for a mortgage, take some time to determine just how much money you can afford to borrow. Find out where you want to secure your mortgage, the different mortgage types that are available to you and the way in which this process works.
What are mortgages?
A mortgage is a loan that you take out to purchase a home or land. A lot of mortgages run 25 years, but you can choose a shorter or longer mortgage term according to your repayment abilities, goals and needs.
A mortgage loan is secured by the value of the property that you’re investing in, until the loan is paid in full. If you’re unable to keep up with your loan payments, your lender will have the ability to take back or repossess your home and can sell this property to recoup its losses.
Determining how much loan you can afford…
Don’t make the mistake of overextending yourself if you believe that you’ll be unable to keep up with your loan payments. You also have to account for your ownership expenses or the costs of running your new home including your council tax, ongoing household bills, home maintenance and home insurance costs.
Mortgage lenders are going to want proof of income and expenses, and they’ll also want to know whether or not you have any current debts. These professionals can additionally request information concerning your household costs, personal expenses and child support or child maintenance.
Ultimately, lenders want to know that you’ll have the ability to stay on track with your loan repayments, even if the interest rates go higher. They may not approve your mortgage if they’re not fully convinced that you’re able to afford it.
Take advantage of our Affordability Calculator to determine how much you’re capable of borrowing.
How much money can you afford to repay?
Where To Find And Acquire A Mortgage
You can submit your mortgage loan application to a building society or bank, and can choose from the range of products that these entities supply.
It is additionally possible to use a mortgage broker who can assist you in making comparisons of the available mortgage products.
Certain brokers consider mortgages from the “whole market”. whereas others might consider funding products from a select number of lending institutions. This is something that they will tell you all about, as well as what their charges might be (if any exist), when you first connect with them.
It’s best to seek advice before applying for mortgages unless you happen to be very knowledgeable and experienced in general financial matters and in the specifics of mortgage loans.
There are times when it may be possible to select a mortgage without the benefit of advice – this is known as an execution-only mortgage loan. Products like these are only offered in very limited situations.
You’ll need to know which property you want to purchase, how much money you require and how long you want to borrow it, the type of mortgage you wish to secure and the interest rate at which you want to borrow money.
A confirmation will be written by the lender showing that you have not received advice and that an assessment has been performed of the mortgage to ensure that it’s right for you.
There are some instances in which you’ll need to confirm that you understand the consequences of securing a mortgage without first getting advice and that you’re willing to proceed despite these things.
Submitting Your Mortgage Application
There are two parts to the mortgage application process. The first step involves finding basic facts to help you determine how much money you can afford to borrow and which mortgage types might be best. The next step is when an in-depth affordability check is performed by the lender and evidence of your income will be requested, if it has not been requested before.
During this stage you should also be given important information about the funding product as well as their services and any related charges or fees when applicable.
How Do Mortgages Work?
When you borrow money, this money is known as capital and your lender will be charging you interest on this capital until all of it has been repaid. The type of mortgage you get will depend upon whether you want to pay interest and capital or interest only.
With a repayment mortgage, you will be paying both interest and a portion of the capital with every monthly payment. Once the mortgage term comes to an end, usually after 25 years, you will have paid off the entire home – as long as you keep up repayments throughout the period.
With an interest-only mortgage, you will only be paying interest on the money that you’ve borrowed, but none of the actual capital.
Mortgages like these are becoming increasingly harder to find given that regulators and lenders are worried about leaving homeowners with massive debts and no feasible ways of resolving these debts.
You will need to have a strategy for repaying the original loan at outset.