This is a list of frequently asked questions which might help you.
A mortgage is legal agreement by which a bank or building society lend money against a property in exchange for a legal charge, interest is paid on the money borrowed at an agreed rate of interest.
A remortgage can mean a couple of things, generally a remortgage is where you are coming to the end of a fixed rate or discount period and would like to ‘remortgage’ in order to source a better deal elsewhere OR it can also mean where you are looking to ‘remortgage’ and raise capital for example to debt consolidate, home improvements or purchase another property. This would be subject to the current mortgage balance.
The are two main ways to repay your mortgage:
An Interest Only mortgage is where you pay regular interest payments on the outstanding balance of the mortgage, you are responsible for the full repayment of the loan at the end of the term.
A Repayment mortgage or also known as a Capital & Interest Mortgage is where you are paying both capital and interest payments over an agreed period of time, at the end of the set term your mortgage will be cleared.
A fixed rate is a rate of interest fixed for a period of time generally ranging at 2,3,5 and 10 years. Fixed rate mortgages are for people who want to budget and know what their payments will be for a fixed period. If interest rates rise, this has no impact on your payments whilst you are within your fixed term. Generally, an early repayment charge applies you would like to clear the loan within the fixed term period.
A tracker rate is a rate of interest linked alongside the Bank of England base rate, if the base rate rises your rate and mortgage will also rise alongside this, it also means if the base rate falls your mortgage rate will also fall.
Discount Variable Rate
A discount variable rate is a discount from the lenders set standard variable rate for a fixed period of time. Generally, an early repayment charge applies you would like to clear the loan within the discount term period.
A lenders standard variable rate is set by the lender; this is generally the rate your mortgage reverts to after the fixed rate or discounted rate period.
An offset mortgage is a mortgage where you can use savings to reduce the amount of interest you pay. The savings are ‘offsetting’ the amount of interest you pay, a savings account is opened and linked alongside the mortgage account.
For Example: – if you take a mortgage for £500,000 and you have £200,000 in ‘offset’ in the savings account then you will only pay interest on £300,000 difference.
You can choose to either pay the same monthly payment and use the saving to reduce the term OR you can use the savings to reduce your monthly payments.
A lot of lenders now work on the basis of ‘credit score’ so on occasion even with previous credit problems if you have a high enough credit score we can still obtain a mortgage via a high street bank. If you have a low credit score due to previous credit problems, then we can still look at lenders who do not credit score but these fall into specialist lenders where you would expect a higher rate of interest.
This mortgage is called a ‘buy to let’ mortgage, you are purchasing a property with the sole purpose of renting this out to a tenant. Generally, the deposit required for these mortgages are higher than a residential mortgage. In addition to this the buy to let lending is based on the rental income of the property, some lenders do still require a minimum employed income.
What is Help to Buy?
The government has created help to buy scheme to help hard working people like you to get on to the property ladder, there are various forms of help to buy so please continue below.
Help to Buy ISA
If you are saving to buy your first home, save money into a Help to Buy: ISA and the government will boost your savings by 25%. So, for every £200 you save, you will receive a government bonus of £50. The maximum government bonus you can receive however is £3,000.
Help to Buy Equity Loan
With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the remaining amount. You will not be charged loan fees on the 20% loan for the first five years of owning your home.
London Help to Buy Equity Loan
To reflect the current property prices in London, as of February 2016 the Government is increasing the upper limit for the equity loan it gives new home buyers within Greater London from 20% to 40%.
Help to Buy Guarantee Scheme
Mortgage Guarantee scheme works in exactly the same way as any other mortgage, except that under the scheme the Government offers lenders the option to purchase a guarantee on mortgage loans. Because of this support, lenders taking part are able to offer home buyers more high-loan-to-value (LTV) mortgages (80-95%). You will still be fully responsible for your mortgage repayments. So if you have a 5% deposit, you will need to take out and pay back a 95% mortgage.
For more information contact us today to find out more, and how we can help with your first property purchase.