There is a lot to weigh up when you’re thinking of house buying and mortgages. From the outset the process can appear daunting and complex, but one of the most important parts of getting to the point of owning your own home is to is to find an experienced mortgage professional (broker or an advisor) to help you. Their experience and expertise will provide help, advice and explanations at key points of your home buying journey – they will be invaluable to you throughout the whole process from start to finish. The process doesn’t have to be a scary one that you navigate on your own
Buying a home is one of the largest purchases and financial commitments you will make in your lifetime and it’s important to work out how much you can borrow – what is your budget? Struggling to make payments could mean you lose your home if you don’t get your calculations right.
What is a mortgage? What is the difference between a mortgage and a loan? Where can you get a mortgage from? How do you apply for a mortgage? How much can you afford to put down as a deposit? How do you qualify for a mortgage? How does a mortgage payment work? What is the process to follow when buying a home? How does a mortgage work and what types of mortgages are available? When these mortgage basics are answered it makes the home buyer process easier and more manageable but the help of a mortgage professional is recommended.
What is a Mortgage?
If you are buying or refinancing property or land, unless you have the cash to pay settle the purchase outright, you will need to obtain a mortgage from a lender. A mortgage is effectively a loan which usually runs for 25 years but the term for the mortgage can be arranged over a longer or shorter period of time. Until the mortgage is paid in full, the loan is ‘secured’ against the value of your property, so if you don’t keep up with repayments a house can legally be claimed back by the lender (repossessed) so the lender can sell on the house to balance their own books (their aim is to not lose money and to get their money back).
The loan is ‘secured’ against the value of your home until it’s paid off. If you can’t keep up your repayments the lender can repossess (take back) your home and sell it so they get their money back.
Is there a Difference Between a Mortgage and a Loan? There is. A mortgage secures borrowed money against a property in order to own a property. A loan is something that can be borrowed from a lender for different purposes where you agree to borrow and pay back an agreed amount of money over a certain period of time.
Mortgages – How Does it Work?
Interest is paid on any loan agreed until the loan is paid back. The type of mortgage has to be decided upon, and there are options such as having an interest and capital mortgage or an interest only mortgage.
Interest is paid on the loan and nothing is paid off the amount borrowed (this is also called capital). Associations overseeing mortgages as well as lenders are increasingly concerned about home owners becoming laden with debts, so a mortgage like this isn’t easy to get. Additionally it is necessary to repay the original loan amount at the end of the mortgage.
With this mortgage, part of the capital (amount borrowed) plus the monthly interest is paid each month. When the end of the term is reached, you own the property because you will have paid back the lender in full.
Combining both can be achieved where the loan can be split between an interest mortgage and a repayment mortgage.
When you have decided how you want to pay back the loan and interest, the next step will be to consider which type of mortgage you would prefer. Will it be fixed interest or variable? Fixed rate will mean paying back the same amount each month, and variable (there are different types of variable rate mortgages) will mean the interest rate can go up or down because the base rate with the Bank of England can go up or down.
Where Can You Get a Mortgage?
There are different ways to get a mortgage. Importantly decide what you want in terms of product and features beforehand if you can.
- Ask an established mortgage broker. A broker will provide mortgage quotes for free and will search for the best deals available from UK lenders; often obtaining deals which are not available to customers from high street lenders. A broker will take all the stress of searching for you for zero cost. Some brokers will be limited to certain lenders and other mortgage brokers will have access to the ‘whole market’.
- Apply to a building society or a bank.
- Try comparison websites – can be a starting point doing this from home to make some searches. You will find comparison sites will provide different results so try more than one.
Choosing a mortgage without receiving advice is called an execution-only mortgage. If you are not experienced in mortgages and finance, seeking professional advice is highly recommended. Execution-only mortgages can be offered in special situations.
- How much you want to borrow and over how many years
- Which property you want to buy
- Type of mortgage
- What type of interest and what rate of borrowing
To protect against liability, the lender will officially write to you to clarify that they haven’t given you mortgage advice and haven’t assessed the mortgage suitability.
Going ahead with an execution-only mortgage means it will be hard for you to complain if you find out afterwards that the mortgage isn’t right for you.
- The lender can if necessary, make checks of your finances to make sure you can make loan repayments.
- You might need to sign a declaration before a mortgage is provided.
Applying for a mortgage
First you should come to an amount you can afford and the type of mortgage that interests you the most.
To do list – 1
- A lender or mortgage broker will ask you some questions around the type of mortgage and the term as well as your financial circumstances.
- A decision will be made regarding the amount a loan provider might be willing to loan to you.
- Also at this point a mortgage broker or an alternative will provide important information about their service, their fees (if any) and mortgage products.
To do list – 2
Then the mortgage broker / lender will carry out an extensive check to see if you can afford the mortgage and will ask for proof of income.
- Your application starts here.
- Full fact finding carried out and an in depth affordability check. Evidence of income + outgoings + specific financial stress tests.
- Can your future income be impacted in any way? Prepare to leave no stone unturned when it comes to assessing your finances – it is all for your benefit to ensure you get the outcome you are looking for.
- Interest rates can increase as well as drop, so feasibility tests are carried out testing different scenarios relating to your finances.
You will receive quotes from various mortgage providers, and then if you are happy to go ahead you will receive an offer which is binding. A Mortgage illustration document will then be issued to reference the terms of the mortgage offer.
- There is a cooling off period of at least 7 days (you don’t have to accept this). Time to reflect so you can be sure you will go ahead. The lender usually doesn’t change or remove their offer during this time.
Sticking to Your Budget
Go with a budget which is achievable one that won’t put too much pressure on you being able to meet the repayments. After all, a mortgage isn’t just for a few months it’s a long term commitment. Be honest about any debts that you may have. Add all of your outgoings to your calculations and don’t take any short cuts. Each mortgage lender makes its own decision ultimately so they can either approve or decline an application.
How Much is Your Deposit Going to Be?
Deposits are usually required as a down payment when purchasing a property. Your interest rate can be lower if your deposit is higher. Loan to Value may come up during the process, and all this means is how much of the house you own / amount that is currently secured in a mortgage. A lower LTV = a lower interest rate (a lender considers a smaller loan to be less risky).
How Does a Mortgage Payment Work?
A portion of the mortgage monthly payment goes towards paying the amount owed (the principal balance). Another portion is the interest payable. The remaining portion, is made up of insurance and taxes.
You’re Been Pre-Approved by a Lender – What’s Next?
You can start looking for homes. A lender will provide you with a letter to show sellers your pre-approved limit. If you find property of interest you can make offers on them. A seller can accept your offer, then your once your lender is happy with details about your finances and your employment a mortgage can be approved after they finish an appraisal.
- A lender makes sure there are no problems or legal issues associated with the property and the sale of the property
- A lender will confirm the property’s value
- Deposit and any costs are paid before the mortgage is signed then the house keys are handed over to you.
Prime Financial Solutions and Mortgages Ltd is an established mortgage and life insurance broker in the UK, so if you are planning to buy a new home or if you own your own home already, you might want to arrange a new mortgage or refinance your existing one…Prime can help!
A Good Mortgage Broker Will Help You Find the Best Mortgage
Finding a mortgage doesn’t have to be so difficult. Getting everything right from the outset with an established FCA approved mortgage broker can be really beneficial. A broker will always look for deals that are suitable for the client and the client’s budget – putting you first not the lender. An experienced, effective mortgage broker can explore the whole market to get the best quotes from the best mortgage lenders.
Prime Financial Solutions and Mortgages Ltd
If you need help with getting a mortgage and any of the following, Prime can help – telephone 01942 665 436:
- Life Insurance
- Critical Illness Cover
- Income Protection
- First Time Buyers
- House Purchases
- Self Employed and Contractors
- Self Build
- Buy to Let
Have you Been Unsuccessful with your Mortgage Search?
If you’ve been declined by mortgage lenders in the past, contact us to see how we might be able to help you. There are various mortgages and various lenders out there. Our wide product and provider range means there may be a very high chance we can help. We are authorised and regulated by the Financial Conduct Authority in the UK. We carry out a thorough search and compare those to get you the best quotes. There is no fee when you ask us to provide mortgage quotes, and we take the hassle and the stress out of the whole process so you can relax and let us do all the heavy lifting.
THE BEST UK BROKER SERVICES FOR MORTGAGES & LIFE INSURANCE
You can see how important it is to get the mortgage basics right. Choosing the right mortgage and getting approved can be quite an obstacle course. Searching for the best mortgage deal to suit your needs can be complex and time consuming. When you choose Prime, you’re choosing a company that puts you first, a team that works hard on your behalf to get you great options – that goes for both mortgages and for life insurance. At Prime we have an exceptional FCA approved team of mortgage & life insurance specialists working for you. We provide an excellent one to one service tailor made to your own individual needs and we make your time with us hassle free – we do all the heavy lifting.
Prime is proud of the reputation it has built over many years, and this is largely reflected through the positive reviews we receive on a regular basis from customers in Wigan, Greater Manchester and across UK, in person, on Trust Pilot and Google online.
Perhaps you have questions you would like answers to? Like..Can I get a mortgage if I’m changing jobs? Will you do a search for me I’m a first time buyer? What information do I have to disclose about my finances? I started my mortgage 7 months ago but it’s not suitable for me? I have been rejected recently by several mortgage lenders can you still help me? Our dedicated team of experts can answer any and all of your questions.
Getting a mortgage agreed is a big step forward in life, whether it’s your first property or your third – and so is having a Life Insurance policy where the two go hand in hand. You can find out more about us and what we do here and if you need help with finding a mortgage or something else, Prime can help. Click here to Get a Life Insurance Quote or use our quick contact form to get in touch. Our friendly dedicated team is available by telephone 01942 665 436 during office hours.