FAQ’s

WHAT IS A MORTGAGE?

A mortgage is an agreed loan from a lender that will be secured against a property.

The lender will charge you interest on the loan which will form a part of your monthly repayments. If you fail to keep up your monthly repayments the lender may repossess the property and sell it in order to get their money back.

Some of the biggest lenders in the market include Halifax, Nationwide, Santander, HSBC, Barclays Bank and many more, all of whom we work with to ensure you, our client, gets the best deal on the market.

WHAT IS A MORTGAGE TERM?

A mortgage term is the number of years over which your whole loan will be repaid back. The term of your mortgage should not usually extend beyond your chosen retirement age. The longer the term the more you will end up paying back in total interest as opposed to taking out a shorter term which will result in higher monthly payments but less interest overall.

WHAT TYPES OF REPAYMENT METHODS CAN I HAVE?

THERE ARE TWO MAIN REPAYMENT TYPES:

REPAYMENT MORTGAGE

Your monthly payments will be made up of two parts; the first will be the amount towards paying the loan which will be deducted from your total loan and the second part which will be allocated towards the interest the lender charges for lending you your required amount. Assuming the monthly payments are made on time, your loan will be repaid in full at the end of the term

INTEREST ONLY

Your monthly payments will only be covering the interest on your loan each month and therefore your loan will not be reducing over the term. So if you have a mortgage for £250,000, at the end of your term, you will still have to pay the lender £250,000 as you have not repaid back any part of the loan. It is important that you have a plan for how you intend repaying the loan at the end of the term.

WHAT TYPES OF MORTGAGE PRODUCTS ARE AVAILABLE?

There are many types of mortgage products available and discussing options with your broker will ensure you take out the right product for your circumstances. Whilst there are many options to be considered, the most common products are as below;

FIXED RATE

Fixed rate mortgage is the most popular type of product and this is because the rate of interest charged will remain the same for the initial fixed rate period. As a first time buyer this type of product can be very beneficial as it will help you budget. Most lenders offer fixed rates over the first 2, 3, 5, 7 and 10 years of your mortgage, however some longer-term fixed rates are also available.

TRACKER RATE

The interest you are charged will be a set amount above the Bank of England base rate and will rise or fall in line with any changes so your monthly payments will vary. Most lenders offer tracker rates over the first 2 , 3 or 5 years of your mortgage, however some lenders offer “Lifetime” trackers which apply to the whole mortgage term rather than just an initial period.

DISCOUNTED RATE

A Discounted rate is also a variable rate so your monthly repayment can fluctuate. The actual interest you would be charged is discounted from the lender own standard variable rate for a given period.

STANDARD VARIABLE RATE

With a standard variable rate interest mortgage your interest will also be a variable and therefore your payments can also increase and decrease. However the actual standard variable rate is the lenders own interest rate that they have full control over. Standard variable rate mortgages usually do not lock you in so allow the borrower total flexibility.

HOW DO I KNOW HOW MUCH DEPOSIT I WILL NEED TO PUT DOWN?

A deposit is the amount of money you will put down towards purchasing a property. The amount of deposit you decide to put down can be decided on a number of factors including; how much savings you have, will you need money to refurbish, how much work needs to be done to the house.

Deposit may also come in the form of a gift from a family member and this will need to be declared to the lender.

In simple terms, the bigger deposit you are able to put down, the more likely you are to be offered favourable interest rates. Most lenders would expect you to put down a deposit of at least 10% of the purchase price but there can be lenders who will accept as little as 5% of the purchase price.

HOW MUCH AM I ABLE TO BORROW?

All lenders will have their own affordability calculator which will help you work out how much they are able to potentially lend based on your circumstances which will include your income, credit commitments, number of people in your household and other regular outgoings and should be used as a guide. You will have to be realistic with how much you are able to pay back in monthly payments, taking into consideration all costs including general living expenses.

DO I NEED AN AGREEMENT IN PRINCIPLE TO PUT AN OFFER ON A HOUSE?

You should aim to have an agreement in principle in place before making an offer on a property as this shows the buyer or estate agent you are a serious buyer and have passed the lenders initial credit score and affordability checks and therefore likely to be offered a mortgage.

An agreement in Principle, however, is still not a full confirmation of a mortgage offer and a full application will still need to be submitted with documents.

WILL I NEED TO PAY STAMP DUTY?

Stamp duty is a tax people pay when buying a property. The amount of stamp duty paid will vary depending on the type of buyer you are and the value of the property you intend to purchase Click here for the HMRC Stamp duty calculator

DO I NEED A SOLICITOR?

Yes, you will need a solicitor and so will the lender to carry out the of the legal work necessary to buy your new home. They will carry out all of the vital checks to protect your interests, ensure all paperwork is in place for the seller to sell the property and for you to buy the said property. Your solicitor will also work with your sellers solicitor to draw up

contract, handle the deposit, request money from your lender, transfer all necessary legal paperwork over to you on completion and register you as the new legal owner

WHAT ARE THE DIFFERENT TYPES OF SURVEY?

Your lender, as part of the mortgage application process will want to ensure that the property is valued at the amount you are buying it for. There are different types of surveys:

MORTGAGE VALUATION

This is a basic report that gives the lender basic information about the value and condition of the property. The surveyor will only highlight any obvious or significant defects or issues that they feel require further investigation by a specialist. This report is not usually shared with the buyer

HOMEBUYERS REPORT

This is a much more detailed report which only the buyers receive, and highlights problems affecting the property, give advice on repairs and maintenance, plus an estimate of what it would cost to rebuild the property if it were completely destroyed. You will have to pay extra for a homebuyers report.

BUILDING SURVEY

This is a comprehensive report and is only usually required when a property needs significant refurbishment or renovation works.

WHAT IS EXCHANGE OF CONTRACTS?

You will sign a contract to say you will be buying the property and the vendor will also sign a contract to say they will be selling the property and the contract are then exchanged with a completion date set. Once these contracts have been signed, you and the seller are legally obliged to purchase and sell the property.

WHEN CAN I GET THE KEYS?

On the agreed completion date (that was set out when you exchanged contracts) your solicitor will send the purchase monies via an electronic payment to the seller’s solicitor. The seller’s solicitor will confirm receipt of monies and legal completion of the contract will have taken place and the solicitor will authorise the agent to release the keys of the property to you. This usually happens at some point in the early to mid-afternoon.