Mortgages
If you are about to start looking for a new house and want to
put in offers then it's worth doing some initial work on finding a mortgage. It
is possible to get a decision in principle from a lender as to how much they
are willing to lend you, so you can demonstrate to estate agents that you are a
genuine buyer.
Seek mortgage advice
When you start looking for a mortgage it is recommended that you seek advice
from an independent mortgage
advisor. Mortgage brokers can compare the market on your behalf and
recommend to you the best deal for your financial situation. Using an
independent mortgage
advisor, such as the Independent Mortgage Advice Bureau, you will be able
to view the pick of the mortgages that are available to you, saving you time
and money. Mortgage
advisors tend to have access to special deals that are not always available
directly from mortgage lenders.
If you talk directly to a bank or building society you will
find that they will provide advice on their own products and services. But
remember, you will only be able to view the mortgage products that they offer
and won't know if you can get a better deal somewhere else from another lender.
The Independent Mortgage Advice Bureau will be able to provide you with some
sound advice on which mortgage to take out.
Should you decide to take mortgage advice, either independently
or directly from a bank, when you receive a mortgage offer your broker or
lender will issue you with a Key Facts Illustration setting out a list of the
key information in relation to your mortgage. Make sure that you review this
document as it will tell you important items such as what will happen with your
monthly payments at the end of any fixed rate offer period and any charges from
the lender for arranging the mortgage.
Mortgage Deposits
Typically when you buy a house with a mortgage you will be asked by the lender
to put down a deposit to pay for a percentage of the overall cost of the house.
In most cases, the larger the deposit you put down, the lower the rate of
interest you'll be charged by the lender. If you don't put down a large enough
deposit you may be charged something known as a 'higher ending charge'.
The usual deposit amount is 10% of the price of the property
but many people put down around 5%. It is possible to put down no deposit, but
these mortgages tend to be extremely expensive and have a higher risk of going
into negative equity, where your mortgage is greater than the value of your
home.
Remember you'll invariably need to pay stamp duty, legal fees,
valuation, surveys and removal costs. All these need to be factored into your
overall house purchase budget.
How much can I borrow?
Mortgage lenders typically offer people an amount equal to three times their
salary. This would mean that someone earning £28,000 could get a mortgage for
£84,000. Of course this might not be enough to cover house prices in today's
climate so mortgage companies have started to offer people mortgages based on
multiples of four times their salary, or even more. It is, however, worth
making absolutely sure that your mortgage payments are affordable on a long-term
basis.Commissions and bonus payments are usually also included in the
mortgage calculations, but they won’t be given as much weighting on the overall
borrowing figure as their payment is not a certainty.
Can I afford it?
House prices have risen sharply over the past 10 years and lenders have
explored more and more ways to assess the amounts of money they will lend to
customers. Affordability of the mortgage, based on your income and expenses,
plays a large part in the overall calculation so be sure to have these facts
ready to hand. Lenders will be looking for any other financial commitments you might
have, such as credit
cards, store cards or personal unsecured loans. The
review will also concentrate on whether you will also be able to pay for any
increase in your repayments when the introductory offer expires.
What are self-certified mortgages
If you work for yourself then it can be hard to prove your average yearly
earnings. In this instance you don't have to prove your income through the
typical methods and can instead choose a 'self-certified' mortgage. However you
must ensure you can afford the repayments on the home loan and you may do well
so seek advice from an independent mortgage advisor.
Credit Checks
If you ask a lender for a mortgage in principal or want
to start the formal process of applying for a mortgage, then they will check
your credit history before making a decision. If your credit report isn't great
then a mortgage lender may offer you a higher rate on the loan or decline the
application. Should you find that the offer you receive is not to your liking
then you can always look elsewhere. Again, it may be useful to use a mortgage advisor,
such as the Independent Mortgage Advice Bureau, to compare the offers available
to you and provide you with a selection that you may find suitable. Be aware
that almost all applications for mortgage will leave a record on your credit
report so only apply when absolutely certain about the mortgage offer.
Insurance
You will often find that mortgage lenders want to sell
you insurance products alongside your mortgage. Others make it a necessity that you choose
their mortgage life cover which will pay off your mortgage in the event that
you die. On top of that the lender will look to offer you buildings and
contents insurance as well. YourHomeBills.com can help you find the right home insurance, life insurance and health insurance policies for you and your circumstances.
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