Things to think about when applying for a mortgage
There are lots of things to think about when applying for a mortgage, as it’s probably the biggest financial commitment you will ever make, so it is important that you take the time to understand mortgages fully.
A mortgage is a loan that you take out in order to buy property or land and usually runs for around 25 years. The loan is secured against the value of your home until it is paid off, meaning the lender can repossess it if you don’t keep up with repayments.
The first thing to do when considering buying a mortgage is to work out exactly what you can afford. Don’t stretch yourself too far as you will have to keep up with repayments as well as the costs of running your own home. When you apply to a lender to ask for a mortgage they will want to see proof of your income as well as certain expenditure and debt. If they don’t think you will be able to keep up the repayments they may refuse you.
In order to get a mortgage, you must pay a deposit which goes towards the cost of the property you are buying. The bigger the deposit you put down, the lower your interest rate will be as the lender is taking less risk with a smaller loan. Typically lenders will look for a deposit of around about 10% of the overall value of the property.
You can apply for a mortgage directly from a bank or building society but it is advisable to seek independent financial advice as it will allow you to pick the mortgage that best suits your financial circumstances. One of our financial advisers can help you compare different mortgages on the market as well as mortgages that aren’t directly offered to customers.
When it comes to paying back your mortgage you can choose a repayment option which involves paying back interest as well as part of the capital each month. The other option is an interest-only mortgage which means you pay only the interest built up on the loan. If you choose this route you will need to have a plan for how you are going to pay back the original loan at the end of the mortgage term. You can also choose between a fixed-rate mortgage and a variable-rate mortgage. Fixed-rate means the interest payments are fixed for a set amount of time (usually 2-10 years) where as a variable-rate moves up and down in line with the Bank of England base rate.
If you would like to find out what kind of mortgage is most suitable for you and your circumstance, book a meeting with one of our advisers.