Mortgages can be obtained from banks, building societies and specialist mortgage lenders. They will assess your circumstances and lend you an amount that you can realistically afford to repay. They will charge interest on the loan and you will have an agreed time span (mortgage term) to repay the amount borrowed. It is important to understand that the interest rate can and will change over the duration of the loan.
Usually, lenders want to see that you can provide a deposit. However, that deposit may be as little as 5% of the property’s market value. If you can raise a 5% deposit, you will be looking at a mortgage with a 95% loan to value (LTV). Loan to value is the loan amount expressed as a percentage of the property value. For example, with 95% LTV on a £100,000 house, you would need a 5% deposit, i.e. £5,000, and your loan amount would be £95,000.
How much to borrow
The amount you are able to borrow is dependent on a number of factors, so you will need to consider the cost of moving, your monthly income and expenditure and your credit history.
Our Mortgage Advisers can help you to find the right number of years (term) over which to repay your mortgage. If you spread your mortgage over a longer-term, your monthly repayments will be lower, and your affordability greater. However, please note that the longer your mortgage term, the more interest you will have to pay the lender.
There are two main mortgage repayment options available to you: repayment and interest only. The availability of both will depend upon your circumstances. Please note that part repayment part interest-only mortgages may also be available; our Mortgage Advisers can discuss this with you.
Types of mortgage
You have several options, each of which has advantages and disadvantages.
The same monthly payments for the initial period (usually 2, 3 or 5 years).
After this period, the rate usually reverts to a variable rate.
Easy to plan as exact costs known.
Payments cannot increase during the initial fixed period.
During the fixed period, payments cannot decrease and early repayment charges may apply.
The rate will be driven largely by the economy and the market.
The lender decides their current rate, which you pay – this does change.
You may benefit from rate reductions and pay less each month.
No early repayment charges during the term.
Rates may increase and therefore you will pay more each month.
Hard to budget
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When buying your first home, it’s important that you choose a mortgage that you are comfortable with. With so many lenders and mortgage products available, it’s easy to become confused. That’s why we’re here to help.
If you want to find out more, contact us to speak to one of our friendly mortgage experts.