A mortgage is typically a loan specifically used for buying property. When buying a home, you’ll be required to pay an upfront deposit, which is a percentage of the property, then pay the balance using a mortgage. It could be from a building society or a bank. You will pay back the mortgage and interest in monthly instalments as agreed with the lender.
Types of Mortgages
All mortgages are classified into two distinct groups;
Interest-only mortgages: The borrower pays the mortgage company interest every month then repay the total money owed at the end of the loan period.
Repayment mortgages: You pay part of the loan and interest every month until you settle the debt.
Within these two divisions, you will get several types of mortgage loans as follows:
1.Fixed-rate Mortgages
This type of home loan guarantees a constant interest rate for a certain period. This could be from one to five years, meaning you may pay your mortgage with the same interest rate over your entire loan period if it is not more than five years.
2.Discount Mortgages
It offers an interest rate that is slightly lower than the creditor’s standard variable rate. The discount could be 1% or 2%. For example, if the standard variable rate is 5%, and your mortgage has a 2% discount, you will repay it at 3%.
The discount will fall and rise according to the standard variable rate and lasts for a set period.
3.Tracker mortgages
There’s an external base interest rate in this home loan, usually from the Bank of England and a set percentage for the loan repayment. If the base rate is 0.1% and the lender charges a rate of 2%, the total interest rate for the mortgage would be 2.1%.
The base rate rises and falls with time; that’s why it is classified under variable mortgages. If the base goes up, the interest rate would also increase.
4.Specialist Mortgages
You may need to buy a house, but your situation doesn’t allow you to secure the above mortgages. Maybe you have a poor credit history or can’t save up enough for a deposit. The following mortgages may come in handy for you;
- Guarantor mortgage:Your partner, family member or parent could guarantee you a loan to purchase a house.
- Bad credit mortgage:A handful of lenders offer mortgages even if you have a poor credit history.
There are also mortgages tailored for self-employed people since it can be hard to secure one.
How to Get a Mortgage
Different mortgage lenders have different criteria and requirements for qualifying one for a home loan. Common factors that influence your ability to win a mortgage and how much the loan could be are;
- Your deposit
- Your income
- The property’s value
- Your credit record
- Length of the loan term
Visit this site sms lån to see how lenders gauge your ability to pay for a mortgage.
To get a mortgage, you will need to follow these steps:
- Save the deposit if you’re buying a house for the first time. If you already own a home, you can use your property equity towards the deposit. Remember, the higher your deposit, the lesser the mortgage you will take, thus easily manageable.
- Shop properties and identify the one you’d like to buy.
- Go through and know UK mortgages and their affordability. Then, select a suitable one.
- It should be one that you can afford.
- Get the mortgage principal, which shows you the amount in cash you can borrow.
- Put an offer against the property.
- If the offer is accepted, take the mortgage. You will need to get a solicitor who will help you with surveys, searches and contracts before paying for your new house.
A mortgage broker (professional advisor) can help you save money and time by finding and applying deals for you.
Once you pay for your home and move in, you will begin monthly repayments for the mortgage. Missed payments increase the owed money and can damage your credit report. If you can’t keep up with the payments, the lender is at liberty to repossess your home.
You can set a direct debit from your bank, where money will be automatically deducted every month towards your mortgage payment.
Conclusion
It is exciting to buy a home, but finances can make everything overwhelming. You can easily choose a mortgage plan to help you fund your new home as long as you have enough deposit. Do some homework and come up with a budget then it will be easy for you to achieve your goal.