Mortgages
Mortgages are loans that you apply for in order to buy a property. This could be your first property where you would be classed as a first-time buyer, you could be buying the property to rent it to tenants and gain an income or you could be selling your existing home and moving to a new one.
Applying for Mortgages
Applying for a mortgage will involve finding a bank, building society or other specialist mortgage lender who is willing to lend you a large amount of money based on your credit history, any other debts you currently have, your salary (which may be combined if it is a joint application) and employment history.
Getting a mortgage is a very involved process and can take anywhere from 2 weeks to a few months to complete depending on the circumstances. It is a big financial step too and should be thought through carefully. The mortgage lender will use the value of the property as security. This means that if you are unable to repay the loan, you risk losing your home, which will be sold in order to repay the money you owe. However, mortgages are paid on a monthly basis and spread over a long repayment period which makes them more easier to repay.
Each mortgage lender has a variety of different mortgage types with differing interest rates. Types of mortgages include repayment or interest only. With a repayment mortgage each monthly payment will go to pay the interest on the loan and then the loan itself so by the end of your term the whole amount will have been repaid. With interest only mortgages you are only repaying the calculated interest, so by the end of the term, you will have only paid off a portion of the loan. You will be expected to use the equity on the value of your property or have another investment plan to cover the final amount.
Options for Mortgages
The different interest options with mortgages include fixed rate, tracker, capped, variable rate, flexible and discounted. It is worth looking closely into all these options to find out which one will suit you best. Also, by getting a mortgage you become eligible for secured loans - non-mortgage payers are restricted to unsecured loans.
The self-employed, employees who work on a commission basis or those who do contract work may want a self-certification mortgage which takes into account their actual income rather than their basic salary. With many of these types of mortgage though you have to provide a larger deposit.
Mortgage Amounts
As a general rule most lenders will offer you approximately 3 and a half times your annual salary. If it is a joint application, then both salaries are combined and multiplied by 2 and a half to come up with an average figure of the amount you will be able to borrow. In addition, you'll typically be able to borrow up to 90-100% of the value of the property, depending on your exact circumstances.
The repayment term is the agreed period of time you have to pay back the mortgage, which is usually for 25 years although you can now get mortgages on a 30 or 40 year repayment basis.
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