Want to step onto the property ladder, but don’t know what to do? We’ve put together a comprehensive guide to mortgages to help get you going.
It’s perfectly normal to be overwhelmed with mortgages Belfast. From APR to fixed rate, tracker, and all other types terms, they’re always an easy thing to figure out. Particularly if you’ve never experienced any significant debt prior to.
We’ll walk you through everything starting with what a mortgage is what it is, how to obtain one and which one could be most suitable for you, with links to other guides so that you can continue to learn. The process of finding the right mortgage for your needs doesn’t have to be difficult!
Which mortgage is it?
A mortgage is basically it is a loan is used to purchase a home. For the majority of people, they will not have the entire amount to pay for the asking price in cash. They pay the deposit (usually at minimum 10 percent of the asking cost) and then make an application to a mortgage lender (like an institution like a bank or a building society) for the remaining.
What is the process of a mortgage?
The mortgage will be a huge loan to your home that you’ll pay back on the basis of a monthly schedule. The lender of your mortgage will determine a suitable payment amount for each month that will include the interest they charge for the mortgage.
The majority of mortgages have a payment time of approximately 25 years, however they can be purchased for shorter or longer lengths of duration. This means that the total value of the loan, which includes the interest is divided into the number of years it takes to repay it. That’s the amount you pay each month.
How do you calculate your mortgage
Here’s an example of the repayment mortgage:
If you’re buying a house worth around £200,000, then you’ll require a deposit of around £20,000.
That’s why you’ll need an amount of loan equivalent to £180,000.
If you were to sign a contract with 2% interest the amount of interest would be £48.922.
The total amount that you would have to pay is £228,882.
If the tenure for your mortgage is 25 years long, your monthly payment amount is £763.
(Mortgage calculation is a bit complex, but in general the interest calculation is carried out by calculating the percentage of the balance you owe each year for the entire time period of your mortgage.)
You can utilize mortgage calculators to figure out what your monthly installments could be. Since interest is cumulative, paying it off earlier typically means paying less interest.
If you are able to pay for a more monthly mortgage payment then you’d have to pay less in total.
In the previous instance, in the event that you were to pay an amount of £180,000 and 2% of interest for fifteen years, instead of 25 you’d have to pay £1158 per month, however the total amount of repayment would be £208,497.
This is a savings of £20,385.
It’s really about your budget – even if you’re unable to afford an amount that is more costly monthly the majority of lenders allow you to pay more than the amount you want to pay without fees (usually one percent or less of your total) during the course of the year. This means you can lower the cost of your mortgage.
Repayment vs . interest only mortgages
It’s not common to find an interest-only mortgage right now because more lenders concentrate on providing repayment mortgages.
Repayment mortgages guarantee that your monthly payments go to the value of the property as well as the interest you have to pay. Thus, at the conclusion of the term you have the property in your possession and you’ve paid off the interest in total.
A mortgage with interest only is essentially a loan where you only pay interest. This means that you do not put any equity in your property, and at the conclusion of the loan period, you don’t actually have the property but are liable to the lender for the full amount. This is typically only offered for properties that are buy-to-let.
What kind of mortgage can I afford?
The mortgage you receive will depend on a number of aspects: Mortgages take risk on you because they’re offering you a massive amount of money, and they must be confident that you’ll pay back the loan. That’s why they run affordability tests on mortgages.
Although 10% is generally the minimum amount for a deposit (unless you’re using the help to Buy scheme, or certain mortgages in which the minimum is 5%) making your deposit higher percentage of your property’s price puts you in a much better position. This is because lenders are required to provide less in addition, it’ll become simpler to pay back the loan.
A larger deposit will open the door to more attractive offers, which will save your money.
The majority of mortgage lenders operate according to the 4.5 rule. They will only loan the borrower 4.5 times your monthly earnings. This could make it difficult to make a purchase by yourself, as opposed to purchasing in a couple, or with a relative or friend. However, this doesn’t mean it impossible to get a mortgage but you should make use of it as a reference in evaluating the properties you want to purchase.
If you’re buying with a partner and your earnings are £50,000 per year then you are eligible for a loan of £225,000. If you were to deposit a minimum at 10% it will be comparable to £22,500. Therefore, the property you are thinking of purchasing should be priced around £247,500.
The mortgage underwriters (people who review an application for mortgage) might take looked over the past six months of your account to determine if there are any issues. Be sure that your accounts appear good, free of charges for overdrafts, excessive spending, etc.
Where can you get a loan
We are a comparison site We strongly suggest shopping for the most competitive rate. There’s a wide variance in the amount of interest charged, as well as the time the mortgage is fixed for (this means that you’ll pay the same fixed amount each month).
But, if you truly enjoy your bank or building society, they could offer great deals to their existing customers, and it’s worthwhile to inquire regarding their mortgages.
You can also think about using mortgage brokers This is a person who will evaluate the various offers offered by lenders that are suitable for you. As a specialist , they could be able to access better deals than people on comparison websites. Most mortgage brokers are paid a commission from the lender you decide to use, but there might be additional fees make sure you examine.
How do you get a loan
A mortgage application should be easy, however you’ll need some information and documents prior to the application.
You’ll need to establish your identity, therefore driving licenses/passports along with an invoice from a utility company are great to carry. Also, you’ll need to prove your income for the year which is why you’ll need a P60 or a P60 from your workplace, the last 3 months ‘ payslips as well as bank statements for the past three months will assist in this. If you’re self-employed You may be required to present the SA302 income tax returns.
It is possible to confirm these details with your lender before making an appointment. They will let you know if they require anything else.
The lender will review the application with you and they’ll likely need details about the property, including what the selling price is, and, possibly, some information regarding your expenditures.
You should ask plenty of questions regarding the mortgage which includes the total repayable quantity, any rules for overpaying and the fees or charges.
Once you’ve submitted the application, lenders will conduct an identity check, examine the data and make an appraisal for the home. This will help make sure that the home you’re looking to purchase is worth the price you’re asking for.
The process of processing a mortgage application may be between 18 and 40 days however it can require longer.
A principled mortgage
The mortgage principle (also known as mortgage in accordance), is one you obtain ahead of looking at properties. It shows that the lender is willing to lend you the loan that proves to the seller that you’re committed to moving forward and you are able to purchase the property.
Mortgage costs and mortgage charges
If you consider the amount of amount of interest you’ll have to pay on an enormous amount of money, it’s easy for thinking that it was the primary expense. Unfortunately, most mortgages have set-up charges.
It’s worth looking at these and adding the costs into your budget. Certain offer the option to add the cost to the mortgage’s total value however, this means that you’ll pay the interest!
On the other hand certain mortgages offer cashback options, or they can waive the cost if you’re already an existing customer of a bank. Be sure to weigh the extra charges against how much your mortgage will cost. In the event that you have a fantastic offer with a fixed rate of 4 years, however, it’s a £250 setup fee, it could be an option better over one that does not charge and a higher interest.
What happens after the fixed rate expires?
If your fixed rate mortgage period is over (usually between 1-5 years dependent on the mortgage product you select) you’ll be put on SVR which is which is the standard variable rate. It is usually more costly and your lender is able to change the SVR they have at any point.
The good thing is that you can refinance now as lenders typically profit from those who don’t want to deal with the hassle of remortgaging and negotiating a new deal every couple of years.
Remortgaging simply means that you’re transferring your home mortgage into a different deal. It could be with the same lender or with a different one. If you’re within the mortgage provider but are signing up for an entirely new contract it is not necessary be paying for the conveyancing.
If you’re refinancing with the new lender, you’ll have to pay fees for solicitors. New lenders will be paying off the previous lender, and you will now are in agreement. The mortgage on your home is likely to be lower since you’ve paid off a part of it in your fixed rate.
You should know the date your fixed rate will expire to be able to search for a great deal.
How will my loan be affected if I decide to relocate?
If you’ve secured an installment loan that lasts for twenty-five years that doesn’t mean you need to remain in the house until the loan is completed. If you sell your property then the balance on the mortgage will be paid at the time of sale, then it is transferred to the mortgage company and you then are left with the remainder of the sale once it’s paid.
If you’ve completed the repayment of a portion of your mortgage, and your property has appreciated in value over the years you’ve been there, you’ll have enough money from the sale to put down a deposit for a new home.
If you’ve not paid off any amount, and your home hasn’t appreciated by value, then you could have negative equity. This happens when the property has a value lower than what what you purchased it for. When this happens, you could be owed money by the mortgage company after you have sold the property or have enough money to make the deposit to purchase an investment property. If that’s the case, think about whether you’ll need to sell the property at this point or whether you are able to improve the property to make it more valuable.
In the summary
The right mortgage for your needs is crucial the deal you choose will be contingent on how much you earn, your value of the house and the amount of your down payment. However, there’s no reason to not to refinance and stay the pace of what you’re paying back in order to accelerate the mortgage payment and reduce your expenses. Don’t settle for the first mortgage that you see and, if you’d like more advice, speak to an expert mortgage broker who can find the best deal for you.
