Residential Mortgage Guide

Our guide to residential mortgages is the perfect read for first-time buyers, homeowners and movers.

We’ll cover everything you need to know, from deposits to criteria and how to give yourself the best chance for mortgage approval.

We’re here to make mortgages simple. Call us to find out how we can help.

Call us – 01604 212879

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Residential Mortgage Guide

Author: Darren Ferguson – Mortgage Specialist & Owner

Published: 04th May 2023

Updated: 23rd August 2023

Read Time

Read Time – Approximately 8 Minutes

Our residential mortgage guide should be helpful, but it’s always best to speak with an adviser to discuss your own personal circumstances and to get the best advice. Call us on 01604 212879 to find out more about our mortgages and how we can help.

What is a mortgage?

A mortgage is simply a loan, taken out over a specific period of time, for example, 25 years, to enable you to purchase a home to live in.

How is it different from a standard personal loan?

Typically it will be taken over a longer term, 20 to 30 years, for example, but the main difference is that the loan is secured against the property, whereas personal loans tend to be unsecured.

What does secured mean?

It means the lender uses the property as ‘security’ for the loan. If you default on your mortgage payments, they can repossess the property and then sell it to recover the amount owed. If there is any shortfall from the sale, you are still liable for that shortfall.

How does a mortgage work?

A mortgage works the same as any other type of loan, in that you will make a monthly payment to the lender to repay the debt back over the term of the loan. The monthly payment to the lender will comprise of 2 parts, an amount to repay the capital (amount borrowed) and an amount to cover interest. In the early years of your mortgage you’ll pay more interest than you will capital but as you get closer to the end of the mortgage term you’ll pay less interest and more capital. 

Mortgage Repayment Types

There are 2 types of mortgage, Capital Repayment and Interest only.

Capital Repayment Mortgage

This is typically the default mortgage type for mortgage customers, especially first-time buyers. A capital repayment mortgage means that every month you pay your mortgage, you pay off some of the original amount borrowed, plus interest. At the start of your mortgage, you will pay more interest than capital off, but as you go further into your mortgage term, you’ll begin to pay off more of the capital and pay less interest.

A capital repayment mortgage is guaranteed to repay your mortgage over the chosen term, provided you keep your payments up to date, so it’s the safest way to repay your loan and should be the preferred option for most borrowers.

It’s also the case that most mortgage lenders will now only offer capital repayment mortgages.

Interest Only Mortgage

With an interest-only mortgage, as the term states, you are paying only the Interest on the loan. You are not repaying any of the capital (loan) you originally borrowed. This means you will still owe the original amount borrowed at the end of the mortgage term, and the lender will want this to be repaid in full when the mortgage term ends.

Interest-only mortgages are highly regulated and will only be offered to customers with strong evidence of a suitable plan to repay the loan at the end of the term.

These days, Interest only mortgages are most commonly used for buy-to-let properties.

How much deposit do I need?

The more deposit you have, the better the rate will be, so it’s in your interest to try to put as much deposit as you can into the property, as this will help reduce the interest rates on offer and lower your monthly payments.

Mortgage lending is about risk, and the more deposit you can put into the property, the lower the risk for the lender of getting their money back should you default on your mortgage, and they then need to repossess and sell the property. The higher the risk, the higher the rate.

Some lenders can offer 100% mortgages, but the choice is limited, and you’ll need to meet specific criteria.

With most lenders, you’ll need a minimum 5% to 10% deposit.

 

First Time Buyers & home movers

Mortgage lenders can offer first-time buyers and home movers 95% Loan To Value (LTV) mortgages under the Government’s mortgage guarantee scheme. This scheme is currently in place until the 31st of December 2023 (but could be withdrawn earlier), and your mortgage must be completed by the 30th of June 2024.

If you qualify, you only need to put 5% down as a deposit.

Some points to note for scheme qualification:

  • You must be a first-time buyer or home mover.
  • Borrowing less than £570,000 (maximum purchase price of £600,000)
  • Buying a property that is not a new build flat, shared ownership, shared equity, Right To Buy or Buy To Let
  • The mortgage must be on a Capital Repayment Basis.

Existing Homeowners Remortgaging

When someone is remortgaging, rather than how much deposit you have, it is about how much ‘equity’ is in the property, determining the mortgage’s loan to value (LTV).

Equity is the difference between the property’s value and the amount outstanding on the mortgage. For example, if a property is valued at £400,000 with a £300,000 mortgage, the property has £100,000 of equity, or 25% of the property value, equating to 75% loan to value. (the loan amount compared to the property’s value).

The more equity you have, the lower the loan to value and the lower the rates will be.

It is possible to remortgage up to 95% loan to value currently, so only 5% equity is required.

100% Mortgages

With a limited number of lenders, it’s now possible to borrow 100% of the funds available to purchase a new home. It’s important to note that this does not cover all the associated costs of buying a home, such as legal fees, mortgage fees, survey fees etc. It will just provide the funds to cover the property’s purchase price.

Skipton Building Society recently launched a 100% mortgage product, which requires borrowers to meet specific criteria, as follows:

  • Applicant(s) must be a first-time buyer
  • Must be able to evidence 12 months of rental history (all applicants)
  • Must have a good credit history
  • Must be aged over 21

It’s important to understand that by borrowing 100% of the funds required, the interest rate will likely be more expensive than if you were to put a deposit down.

There are certain other risk factors to consider, such as the impact of a fall in property prices, resulting in the potential for negative equity, which could impact your ability to refinance your mortgage when your initial deal ends.

Call us on 01604 212879 if you would like to find out more about 100% mortgages.

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Did you know?

The amount you can borrow can vary substantially from lender to lender. A broker will be able to source the whole market to let you know your maximum borrowing potential

Mortgage Support Schemes

There are some mortgage schemes that could help you purchase your home, as follows:

Help To Buy

The help-to-buy scheme is now only available for First-time buyers in Wales.

You’ll need a minimum 5% deposit to qualify, and the scheme is available until March 2025.

Right To Buy

If you have been renting a property from the local authority, then you may be able to buy the property at a discounted value. You should speak to your local authority to see if you qualify and determine the discount level you may be eligible for. It’s possible you may not need a deposit.

Shared Ownership

Shared Ownership enables you to purchase a share in a property, typically 25% to 75%, and pay rent on the remainder. This means borrowing less, so you may require a smaller deposit.

There are some basic criteria you’ll need to meet in order to be eligible.

You must:

  • Be aged 18 years or over
  • Be a first-time buyer or a previous homeowner who cannot afford to buy a new property under a normal homeownership mortgage
  • If you live outside of london, your income or joint incomes must be under £80,000.
  • If you live within London tyour income must be below £90,000.
  • Not in any current rent arrears
  • Have a good credit history

Types of Mortgage Interest Rates

When you take out a new mortgage, you’ll need to decide what type of interest rate you want.

There will be several options to choose from, but typically it’ll either be a fixed or variable rate of some sort and we explain these further below:

Fixed-Rate

Fixed Rate

The rate will be fixed for a period of time. Whatever happens with interest rates, whether they go up or down, your rate will not change.

Typically lenders will offer a choice of fixed rate products, for example, 2, 3 or 5 years or maybe longer, but generally, the longer you want the rate to be fixed, the higher the rate will be, but there can be some exceptions to this dependent upon economic conditions. They are the safest rate for someone who wants the security of knowing exactly what they will be paying each month for the fixed rate period.

At the end of the fixed rate period, you move onto the lender’s standard variable rate (SVR). Your broker or lender will typically advise you in advance that your deal is ending so you can start reviewing options to replace the deal when it ends.

Tracker-Rate

Tracker Rate

A tracker rate is a form of a variable rate. The rate you pay is linked, and will track another type of rate, typically, but not always, the Bank of England base rate.

This means that if the Bank of England increases the rate by 0.25%, your rate would also increase by 0.25%. If the rate goes down, your rate will go down.

Tracker mortgages usually are for short-term periods, typically two years, at which point you’ll need to find another deal.

Discount-Rate

Discounted Rate

A discount rate is a form of a variable rate. The rate you pay is discounted by a percentage below the lender’s Standard Variable Rate (SVR)

If the lender decides to increase their standard variable rate (SVR), which they can do at any time, your rate will also increase. If the SVR goes down, then your rate will also go down.

These types of deals are typically offered for a short time, for example, 2 to 3 years.

Standard-Variable-Rate

Standard Variable Rate (SVR)

As the name states, this is a variable rate and the rate you will go onto when a deal, such as a fixed rate deal, ends.

All lenders will have a standard variable rate, or SVR for short. It is the rate your mortgage will revert to when any current deal you are on ends. Moving onto the SVR will typically mean paying more on your mortgage.

Lenders ‘SVRs will typically move up and down when the Bank of England changes the base rate. However, lenders can choose how much of the increase or decrease to apply.

Choose

Which works best for me?

The key point to remember is that the cheapest is not always the best, and choosing a rate that considers your budget and comfort or risk level would be best.

A fixed rate can offer peace of mind and security in budgeting, but you may have to pay a little more for that security. If your budget is tight and you do not have a lot of disposable income each month, you might not want to risk a variable-rate mortgage. On the other hand, if you have lots of disposable income, you may think the risk is worthwhile taking in the hope it works out cheaper over the deal term.

What happens when my deal ends?

When an existing mortgage deal ends, you will move onto the lender’s SVR, which will typically be higher than the current deal you were on, which will mean an increase in your mortgage payment. Sometimes, this increase can be a significant jump. Hence, you need to know when your deal ends and plan. A good broker will generally be in touch well before your deal ends so you can start reviewing options, typically six months beforehand.

Your options at that point are as follows:

Product Transfer

Product Transfer

This is where your lender offers you a new product to stay with them, which will typically take effect when your current deal ends.

You’ll generally have a choice of products, some with and without fees.

What are the advantages of a product transfer?

  • It’s a simple process with no need for a new application or the requirement to supply up-to-date financial evidence, such as payslips or tax calculations. This can be particularly beneficial when someone’s income or employment may have changed, and moving to a new lender may be difficult.
  • Compared to the cost of switching to a new lender, it may be more cost-effective, with no requirement for property valuations or legal fees. There may still be arrangement fees, which may be lower than a new lender would charge.

What are the disadvantages of a product transfer?

  • The lender may only offer a limited choice of products, which means you could be missing out on better deals elsewhere.
  • Some lenders’ product transfer rates are higher than they may offer new customers.
  • A product transfer is typically a like-for-like switch, meaning you cannot borrow more. If you want to release further funds, it may be a 2 step process, or it may be easier to switch to a new lender.

 

remortgage

Remortgage To A New Lender

Remortgaging is moving your existing mortgage from one lender to another lender, usually to benefit from a better deal.

You’ll have access to a much wider range of products.

What are the advantages of a remortgage?

  • You could benefit from a better deal than your current lender is offering, saving you money.
  • Access a much wider range of products that may suit your requirements better. This could be beneficial if you want to raise funds or change your mortgage in any way.

What are the disadvantages of a remortgage?

  • You’ll need to complete a whole new application, and the loan will be fully underwritten as a new mortgage application, requiring up-to-date evidence of income and bank statements.
  • More costs could be involved, such as valuation and legal fees, although many lenders offer a free valuation and free legal packages.
  • It will take longer than a product transfer. A new mortgage application could take 2 to 3 months, so you must start the process early rather than waiting until your current deal ends.
  • If your credit profile has changed since taking out the initial mortgage, this could impact the acceptance of the new mortgage.
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Why do business with us?

We’re mortgage experts and know lender criteria inside out. We’ll make sure you find the best deal for your new home.

How many years should I take my mortgage for?

This is an important factor to consider, as the longer you have the mortgage, the more interest you’ll pay. Most people will opt for a standard 25-year term, but some thought should be given to this, and It should be a balance as to what is affordable and how this fits with your plans.

  • What age will the mortgage take you to?
  • Is shortening the term putting you at your maximum monthly budget? It’s important not to overextend yourself.

Due to current interest rate levels, many borrowers are now opting for longer-term mortgages, up to 30 years or more, to keep them affordable. This may be an option in the short term, and when your current deal ends, you can always review the mortgage term again if rates are more favourable at that point.

Typical Mortgage Fees

Fees will vary dependent on your situation and should be an important consideration when assessing any mortgage product. We’ll cover the main fees below.

Lender Arrangement Fee

An arrangement fee is typically the highest fee a lender may charge. The fee is generally specific to a product and could be anything from zero to a flat fee of £995 or more. Some lenders, albeit more specialist lenders, charge an arrangement fee based on a percentage of the loan amount borrowed (typically 1% to 2%). This fee can either be paid upfront or added to the loan. If you decide to pay the fee upfront, you should check with your broker or lender if the fee is repayable if the mortgage does not proceed.

If you decide to add the arrangement fee to the loan, it’s important to understand that you will then pay interest on that fee for the lifetime of the mortgage, so if you can afford to pay it upfront, it may make sense to do so. 

Lenders generally offer a range of products, with the lowest rates having the highest fees and the higher rates, with the lower fees. A broker will be able to compare the deals over the product terms and let you know which is the most cost-effective. 

Valuation Fee

This fee is usually paid at the point of application and is charged by the lender for a standard mortgage survey. The price payable is dependent upon the value of the property. Some products may come with a free valuation, especially for first-time buyers or someone who is remortgaging.

Application Fee

Generally paid at the point of application, and is a fee charged for securing a particular product and reviewing the application. The fee is usually non-refundable. This will typically range from £100 to £200, although it could be more (not all lenders will charge this).

Legal Fees

You’ll need a solicitor to complete all the legal work required to buy your home. Costs for this can vary, and it can very much be a case of getting what you pay for in terms of service. Typically the cost of legal work will range from £750 to £2000, dependent upon the nature of the transaction. If you are selling and buying, it could be more.

Stamp Duty

If you are liable to pay it, Stamp Duty Land Tax (SDLT) will typically be your highest cost in any property transaction.

There are SDLT rates specifically for first-time buyers.

First-Time Buyers (England & NI) – will not pay SDLT on purchases up to £425,000 and then 5% on the amount between £425,001 and £625,000

View the current stamp duty rates.

Stamp Duty Rates (England & Northern Ireland)

  • up to £250,000 0% 0%
  • £250,001 to £925,000 5% 5%
  • £925,001 to £1.5 million 10% 10%
  • Over £1.5 million 12% 12%

Land & Buildings Transaction Tax (Scotland)

  • up to £145,000 0% 0%
  • £145,001 to £250,000 2% 2%
  • £250,001 to £325,000 5% 5%
  • £325,000 to £750,000 10% 10%
  • over £750,000 12% 12%

Land Transaction Tax (Wales)

  • up to £225,000 0% 0%
  • £225,001 to £400,000 6% 6%
  • £400,001 to £750,000 7.5% 7.5%
  • £750,001 to £1.5m 10% 10%
  • over £1.5m 12% 12%

How can I improve my chances of mortgage approval?

There are many lenders and thousands of mortgage products that cater to all sorts of applicants, whether they are first-time buyers, home movers, employed or self-employed, clean credit or poor credit. Your situation will determine what lender and rates you end up with.

You want to ensure that you get the best terms possible, so there are things you can do before applying for a mortgage to give yourself the best opportunity for successful approval.

It’s important to understand that just because you may not fit with one lender doesn’t mean you won’t fit with others. Many lenders have little niches they specialise in and don’t just cater to vanilla applicants.

Having a good size deposit will help, but there are other things you can also do to help.

credit-profile

Credit Score

All mortgage lenders will do a credit check at the point of application, which is one of the determining factors in whether a loan is agreed. Most lenders will have their own internal scoring system based on factors known only to them, but the typical factors they’ll be looking for will include the following:

  • Are you on the electoral roll? – can they easily trace you to a current address, and if so, for how long, with the longer, the better
  • Previous addresses – does this show multiple address moves over short periods of time – this could be a red flag as it could indicate financial difficulties or instability.
  • Your credit history, specifically how well it has been managed with regard to credit or store cards, personal loans, car finance or another mortgage you may have had. Have the payments always been on time, or have they fallen into arrears? County court judgements and default notices will be a red flag to lenders, as will payment arrangements such as IVAs or previous Bankruptcy.
  • Your utilisation of available credit – in other words, how much of the credit are you using that is available to you? If you have two credit cards with a £5000 limit on each and you have maxed out or are close to maxing out on both, this won’t be looked on favourably.
  • Your overall debt-to-income ratio – This is the amount of your monthly debt repayment compared to your monthly income. If half of your monthly income is going toward debt repayments, again, this won’t be favourable to mortgage borrowing.

 

to-do-list

Things To Do

We would recommend the first thing to do is to get an up-to-date copy of your credit file.

Different lenders will use different credit agencies, so we recommend someone like ‘checkmyfile’ that will show data from the leading credit agencies, Experian, Equifax, Transunion & Crediva. You can click the link below to get yours.

Once you have this, check the following:

 

  • Check that your addresses are up to date on any active credit accounts. This will avoid any confusion with lenders as to where you live.
  • Try to clear or reduce any overdraft facility that you have
  • Get on the electoral roll if you are not showing already.
  • Increase your score – this can be particularly relevant to first-time buyers without any credit. Apply for a credit card, put a small amount on it each month, and repay it in full. Only do this on the basis you will repay each month. You don’t need or want to build up debt, just to prove you can manage it.
  • Don’t apply for credit if you have a mortgage application already proceeding. This could result in a mortgage agreement being pulled, and many lenders make last-minute checks.
  • Don’t miss any payments on anything.
  • Previous linked relationships – if your file shows a financial association with an ex-partner, write to the agency and ask them to remove it.
  • Do not apply for any payday loan – this will clearly show financial instability

Get the only Credit Report that checks data from Equifax, Experian, TransUnion and Crediva

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(‘Free’ report relates to an initial 30 day free-trial, then £14.99 a month – you cancel anytime online)

What is an Agreement In Principle?

An Agreement In Principle, also known as a Decision In Principle (AIP or DIP), is an initial approval by a lender to offer you a mortgage. It is an approval subject to reviewing all of the information required for your application, such as evidence of income, bank statements, and proof of identity.

Essentially it is a credit check and a simplified affordability check subject to full underwriting.

Typically, most estate agents will ask for evidence of an AIP when you submit an offer for a property. Having an AIP can put you in a stronger position than another buyer who may not have one, so it makes sense to have one. It also provides some guidelines for your maximum borrowing amount, enabling you to offer with more certainty.

We are able to get an agreement in principle with most lenders the same day. Call us today to get yours.

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With most lenders, we can get a decision in principle within 30 minutes. Call us today for yours.

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Mortgages for the self-employed

Being self-employed can sometimes feel like jumping over multiple obstacles to get a mortgage agreed.

Whilst being self-employed can sometimes prove a little more challenging, there are plenty of options with lenders to cater for most situations.

Typically self-employed individuals will be one of the following:

  • Sole Trader, including CIS workers
  • Partnership
  • Limited Company – Directors may technically be employed, but for mortgage borrowing, lenders will treat anyone who owns more than 20% of the shares in a company as self-employed.

To qualify for a mortgage, self-employed individuals will typically need to meet the following:

Self-Employed-Time-Trading

Time Trading

Typically a lender will want to see that you have been trading for a minimum of 2 years.

There are some exceptions, with smaller and more specialist lenders who can consider self-employed applicants with just one full year of trading. Rates will be higher, and you may need a larger deposit.

accounting

Have an Accountant

Lenders will want to see a suitably qualified accountant has prepared accounts.

Typically accountants who are members of a recognised professional body will be preferred, such as:

 

  • Institute of Chartered Accountants in England & Wales
  • The Association of Chartered Certified Accountants
  • Institute of Financial Accountants
Evidence of Income

Evidence Of Income

Dependent upon your type of self employment lenders will require the following:

 

  • Last two years business trading accountants
  • last two years personal tax calculations with corresponding tax year overviews (previously known as an SA302)
  • In the case of contractors, evidence of ongoing and previous contracts.
  • Bank Statements – both business and personal

Mortgage for CIS Subcontractors

Although CIS workers are treated as self-employed, they do not necessarily need to meet the same criteria as other self-employed individuals. We have lenders who can work with as little as three months’ payslips.

You will need three months of continual work under the CIS scheme or six months if you are a first-time buyer. Call us to discuss options.

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Are you currently house hunting?

If you want to make an offer, the estate agent will ask you for your decision in principle. Put yourself in pole position and get yours today!

How much can I borrow?

Unfortunately, it is not possible to tell you an exact figure as every lender’s affordability models differ. It could be anywhere from 4 to 6 times your income, dependent upon the lender and your own individual situation.

It’s also not just about income multiples. Lenders now run affordability tests or stress tests to gauge that a mortgage will still be affordable in the case of certain events, such as a rate rise or a new child.

The following is a summary of what lenders will ask for as part of any mortgage application:

 

  • Details of your salary ( basic, overtime, commission, bonuses, other allowances) – Your payslips and p60 should be able to provide details of these
  • Any extra income you might receive (benefits, pension income etc.)
  • You’ll need to complete a monthly household budget detailing your monthly outgoings (utility bills, council tax, child care, unsecured debt such as loans and credit cards, insurance, HP agreements etc.)
  • General expenses, such as food, clothing, gym memberships

How is self-employed affordability calculated?

For employed applicants, lenders will typically assess the last three months’ payslips and the most recent p60.

For self-employed applicants, lenders will look at either the trading accounts of the business or the individual’s tax calculations, typically for the last two-year period.

In terms of calculations, it also depends on your type of self-employment. For example, lenders will likely work off an average of the last two years’ net profit for someone who is a sole trader. In contrast, in most instances, a company director will have affordability calculated on an average of the previous two years’ salary and dividends.

There are exceptions to all of the above, and several lenders have different approaches to self-employed affordability calculations. It’s best to speak to an adviser, and we can give you a better idea of options.

How do I compare mortgages?

Thousands of mortgage products are available, so knowing which is best can be challenging. We’d always say to speak to a broker as it’s their job, and they know how to compare and have specific software that enables them to compare products.

It’s not always about the cheapest deal. There are other issues to consider, such as:

  • Do you meet the lender’s affordability criteria? Will they lend the amount required?
  • Do you fit the lender’s general lending criteria?
  • Is the property suitable for security?
  • Is your credit profile acceptable to the lender?
  • Is the source of the deposit acceptable?
  • And many other considerations.

That’s why it is always best to speak to a broker, as they’ll have a solid understanding of lender criteria and some of the issues you may or may not come up against.

Lowest cost versus lowest rate

When comparing mortgages, the lowest or headline rate is often not the best deal, and this is because the lower rates tend to have the highest fees. It’s called a headline rate to attract your attention, but when you look at it in more detail and consider the fees, it may not be the great deal it appears to be.

A good mortgage broker will talk through the lowest rates and then, as a comparison, show you the lowest-cost deals, taking into account any fees that are payable for the product. They’ll compare the products over the initial product term you selected, for example, five years if you wanted a five-year fixed-rate product, and let you know which is best.

Understanding the APRC

APRC stands for Annual Percentage Rate of Charge. It’s a percentage that must be included on all mortgage illustrations to help you compare the overall cost of a product, considering the fees, the initial interest rate and the lender’s standard variable rate.

APRC can be misleading, as part of the calculation is based on the lender’s standard variable rate (SVR) and on the assumption that you’ll stay on that SVR when your initial deal ends. In reality, that won’t happen. In most circumstances, customers will choose another product when their deal ends and never move on to the SVR. So you could have an example where a lender has a great deal over the five years, but because their SVR is a little higher than other lenders, they may show a higher APRC.

 

How To Apply

Its simple to apply, just call us on:

01604 212879 and we’ll handle everything for you.

Lets-talk-about-you

Let’s talk you

It’s not just about the property. You’ll need to meet specific criteria, so it’s important we understand a little about your background to make sure we find the best option for you. Time spent at the front end is time saved at the back end!
lets-talk-about-property

Let’s talk property

We’ll need to know all about the property, such as value, type, location, income and ultimately, your plans. The more we know, the better, and we’ll guide you through what we need to know.
Lets-talk-about-options

Let’s talk options

Time to piece it all together and talk about your options. We’re firmLets get movin believers in straight talking, so we’ll tell you what can and can’t be done and present you with options best suited to your requirements.

Lets-get-moving

Let’s get moving

If you’re happy with the options discussed, it’s time to get things moving and get an agreement in principle. We’ll handle everything and support you along the way to help ensure your application is as smooth as possible.

Important Mortgage Features

Below we’ll review some of the other features of mortgage products that may be important to you.

Overpayments

An overpayment is where you pay more than you are required to, typically to pay off your mortgage over a shorter term. Any money overpaid is used solely to repay the capital on your loan (the amount owed). You will not pay interest on overpayments.

Most lenders will allow overpayments of up to 10% of the outstanding mortgage balance each year, but you should check to make sure with any product you choose.

Early Repayment Charges

An Early Repayment Charge, or ERC, is a fee you must pay if you come out of a mortgage product before the product ends. For example, you have a five-year fixed rate but pay your mortgage off or switch to a new product after three years. Because you are coming out early, the lender will charge you a penalty fee for doing so.

Most, but not all products will have ERCs and you should check the details with any product you select. Typically they only apply for the period of the product term. When your product ends, there should be no ERCs to pay.

An ERC typically ranges from 1% to 5% of the amount paid off. If your product allows for 10% overpayments, this will not incur an ERC unless you go over the 10%, in which case any amount paid off over the 10% would incur a penalty.

Portability

Portability is a feature that allows you to move the mortgage over to a new property if you move home. This can be useful in certain circumstances where you are moving home but are tied in on a product with Early Repayment Charges, and you don’t wish to incur those penalties by coming out of the product early.

Even though your mortgage is portable, it’s important to understand that when moving home, most lenders will undertake a new affordability assessment, even if you are not borrowing any more.

 

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Frequently Asked Questions

Can I get a mortgage with bad credit?

Yes, this will depend on the severity of the adverse credit, but several lenders provide mortgages to applicants with poorer credit profiles. 

We recommend obtaining a copy of your credit report and then calling to discuss it. 

What is a guarantor mortgage?

A guarantor agrees to repay or pay your mortgage if you cannot. The guarantor is usually a close family relative, typically a parent or parents, and is most commonly used by first-time buyers. 

Being a guarantor means they will legally be liable for the mortgage, as will the applicant. 

What is a mortgage valuation?

It is a valuation of the property undertaken by a surveyor to assess whether the property is suitable security for the lender. The valuation is for lending purposes only and not an in-depth survey of the property.

If you want a more extensive survey, you could opt for a homebuyer’s report or a full structural survey. A homebuyer’s report is more detailed and can highlight any issues that may not have been picked up on a standard mortgage survey.

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