FIND OUT HOW MUCH MORTGAGE YOU CAN BORROW
When looking to take out a mortgage in the UK, it's important to know how much you can borrow. This will depend on your income, credit score and other financial commitments.
The most common type of mortgage in the UK is a repayment mortgage. With this type of mortgage, you repay both the capital (the amount you've borrowed) and the interest each month.
If you have a repayment mortgage, your monthly repayments will usually consist of two parts:
The remaining balance left on your mortgage at the end of the term should be repaid in full by either you or your estate (if you die before repaying everything that is owed to the lender). Repayment mortgages are most commonly taken out over a 25-year period, but you can choose any repayment period that suits your needs.
INTEREST ONLY MORTGAGES
With an interest-only mortgage, you repay the interest on your home loan each month, but not the capital amount. This means at the end of the term, you have to pay off both the capital and the interest. Interest-only mortgages used to be quite popular in the UK, but they are now much less common. This is because many people who took out an interest-only mortgage at the height of the housing market crash found themselves unable to repay the capital when the time came.
If you have an interest-only mortgage, your monthly repayments will be lower than they would be for a repayment mortgage, but you may still have to pay off some capital at the end of the term.
Your mortgage lender is responsible for checking that you can afford your mortgage payments each month. Lenders use affordability calculators to work out how much they are willing to lend people who want to take out a mortgage. When applying for a mortgage, you'll be asked to provide information about your income and debts, including any credit card payments or other loans that you have.
To help lenders work out how much they are willing to lend you, you'll also need to give them details of any other financial commitments you have, such as car loans or rent. If you have a good credit score, you may be able to get a mortgage with a high loan-to-value (LTV) ratio. This means you can borrow more money relative to the value of your property. Your credit score is determined by a number of factors, including your history of managing debt, whether you have any county court judgments against you and how many credit applications you have made in the past six months.
If your credit score is poor, or if you only have a small deposit saved up to put towards buying a home, you may be able to apply for an affordable mortgage loan. These are mortgages that are offered by the government or by some of the biggest lenders in the UK.
If you're thinking about taking out a mortgage, it's a good idea to speak with a good mortgage broker.
Specialist brokers can help their clients find the best deals on traditional or buy-to-let mortgages and other loans. They can also advise new home buyers about factors like how much they should spend on a house, what type of mortgage would be best for them and how they should structure their repayments.
People often forget that it is possible to get up to 4 quotes from different lenders, therefore getting you the most suitable deal for your needs. By filling out one quick form, brokers can match you with multiple lenders who are willing to offer competitive rates and savings based on your unique circumstances.
Booking an appointment with a mortgage broker is often free of charge, so there's no harm in getting some quotes and finding out if you can get a better deal.