Introduction To Mortgages
Whether you’re a first-time buyer or seeking a better deal, we can help you find a mortgage that suits you
This is a quick and essential guide to home loans. Mortgages are loans designed to help buyers purchase a residential property. When you take out any loan, the lender charges interest, and the same applies to a mortgage.
A mortgage is a ‘secured’ loan, meaning it is secured against the property being purchased until the loan is fully repaid. Sources of residential mortgages include high street banks, building societies, and other lesser-known financial institutions.
How lenders decide
Mortgage providers follow a set of rules when deciding whether to grant a mortgage. Although different lenders have varying criteria, the amount you can borrow depends on the provider’s requirements.
Here are some of the factors lenders take into account when making their decision:
Affordability
Lenders will carry out stress tests to make sure you can afford the loan you want, even if interest rates increase and repayments become more costly. This is to avoid a situation where you are unable to keep up with repayments and risk losing your home.
You can also take steps to ensure your mortgage remains affordable if unforeseen circumstances arise, such as a drop in household income. Your adviser can explain affordability tests and the associated risks during your consultation.
Deposit
Depending on your circumstances, you might need to provide a deposit. A deposit reassures the lender that it can recover the debt by selling the property if you are unable to repay your mortgage in the future. Your deposit also lowers the lender’s risk if the property value falls, which can result in a lower loan-to-value (LTV) ratio.
Valuation and Survey Fees
Before granting a mortgage, a lender will require a valuation to confirm that the property is worth the purchase price. The valuation fee varies depending on the lender and the property’s value.
The basic mortgage valuation is conducted for the lender’s benefit. You might consider adding a survey to the valuation, which offers a report on the property’s overall condition. For an older or poorly maintained property, you could opt for a full structural survey. This is a detailed assessment of the property’s structural integrity that includes recommendations for repairs.
Property type
Some properties, such as flats above commercial premises, studio flats, and ex-local authority buildings, may be seen as having less future appeal. Consequently, some lenders might not offer a mortgage on these properties, which can limit your borrowing options.
Listed buildings (e.g., Grade 1, Grade 2) may have restrictions on how you can maintain or alter them. Some unlisted properties, such as those in an Area of Outstanding Natural Beauty (AONB), can also face similar restrictions.
Time frame
Mortgage providers usually set a maximum term for loans and establish a specific date by which the mortgage must be fully repaid.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Tax treatment varies according to individual circumstances and is subject to change.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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