In this guide, we outline some of the main FAQs surrounding mortgages…
1. What are the main types of mortgages?
There are different types of mortgages; each which may suit different people and circumstances – and there can be a lot of factors to consider.
However, there are three main types of mortgages available at the moment:
- Fixed rate: Where the amount you’re charged remains the same, for a fixed period, despite changes in interest rates
- Tracker Rate: this is directly linked to the bank of England base rate, therefore if this rate increases your mortgage will automatically increase and likewise if it decreases your mortgage will automatically decrease
- Variable rate: you would usually revert onto a variable rate after your fixed/tracker product ends. The variable can change during the term of your mortgage and is determined by your lender. The rate can go up and down and not only after the base rate changes.
There are plenty of other types of mortgages available – speak to us today to find out which is best suited to you.
2. What is the mortgage process?
The process of buying a home usually starts once you have your deposit funds secured. This may have taken months or years of saving – or you may have a helping hand along the way.
Either way, once the money is in place, you can then set up a mortgage meeting to assess your financial situation.
Once we’ve conducted a fact-find, we’ll arrange an agreement-in-principle; confirming how much the lender is prepared to loan you. Then, once you’ve found the right house, we will fill out the paperwork and apply for the mortgage on your behalf. Once the mortgage has been offered, we’ll liaise with your solicitor for a completion date and ensure the lender releases the funds on time.
3. Do I need a mortgage-in-principle?
We always recommend having an agreement-in-principle in place, prior to looking for a property. An estate agent or a new build developer will usually ask for this to prove that you have the funds in place – and that you’re able to proceed with the purchase. Having it ready puts you in a strong position for negotiation and offers you peace of mind that you’re able to secure the mortgage you require.
4. What documents do I need to bring to my mortgage meeting?
What we always ask clients to bring is:
- 3 months’ payslips
- 3 months’ bank statements
- ID, including proof of name (e.g. driving licence or passport) and proof of address (e.g. utility bill)
- An approximate mortgage balance, if you already have a mortgage
- Loan or credit commitment details
5. Can I still get a mortgage if I have a poor credit rating?
A poor credit rating will affect your ability to secure a mortgage; but there are lenders out there that would consider lending to borrowers with a ‘bad’ history.
However, there may be fewer lenders who will let you borrow money, meaning that they may be more expensive, or you might need a higher deposit.
Using a mortgage broker may also improve your chances, because ‘bad credit’ mortgages are often only available to them.
Here are some tips for improving your credit score.
6. How much money can I borrow?
The figure you’re able to borrow depends on your income, outgoings and financial circumstances. Undertaking a thorough fact-find process with a mortgage advisor will establish your borrowing ability.
Every lender has different criteria; and a whole of market advisor – who has knowledge of the lenders – will be able to guide you on this.
7. How long do mortgages usually last?
A standard mortgage term is 25 years in the UK, but you can get one that lasts between six months and 40 years. E.g. if you took out a 25-year mortgage in 2019 and made all of the repayments, it would be paid off in full by 2044.
Longer term mortgages cost less per month, because they’re spread over a longer period. However, you pay more overall, because you’re charged interest over a longer term. A shorter-term mortgage costs more per month but you pay the balance off quicker and own your home outright much sooner.
8. How long does it take to get a mortgage offered from application stage?
Each case is entirely different, depending on the lender’s timescales at the time of application; and the complexity of the case. Usually, two weeks is a good marker to go by.
9. When I’ve set my monthly payments for my mortgage, can I increase the amount at a later date?
The majority of lenders will allow you to make overpayments on your mortgage. This is usually restricted to 10% of the balance, per year. They may allow you to set up a standing order to increase the payments – or you could pay a lump sum at the end of the year, reducing the overall term of your mortgage.
For more information on paying off your mortgage, read this.
10. What if I want to move to a new house before I’ve paid off my mortgage?
It is not expected that you would stay in a property for 25, 30 or 35 years; meaning that there are options if you would like to move to a new house. The majority of lenders will allow you to port your mortgage on to another property – which is a common choice if you are currently tied in to a product with them and have early repayment charges (ERC).
If you wanted to upsize, for instance, you would have to choose a second product for the additional borrowing – on top of your current agreement – as long as your affordability allows you to do so. However, it is always worth an advisor checking to see if it would be more cost efficient to change lender and pay the ERC, if there are better deals currently available.
For more information on switching lenders, read this blog.
If you’re looking for a mortgage advisor/broker in Huddersfield, Brighouse, Elland or surrounding areas, then get in touch for a no obligation consultation:
Approval number: Sol7579