Applying for a mortgage is always a daunting process, especially if you’re a first time buyer. There are so many things to consider and so many questions to ask. It’s a big commitment after all. While our Yeovil mortgage brokers are always on hand to answer any questions you may have, we thought it would be best to prepare this article on the most commonly asked mortgage questions to help give you peace of mind.
- How Much Can I Borrow?
- Will Bad Credit Prevent Me From Getting A Mortgage?
- What Different Mortgages Are Available?
- What Types Of Income Are Accepted?
- How Does The Mortgage Process Work?
- What Does LTV Mean?
- How Much Will My Mortgage Cost Per Month?
- How Much Deposit Will I Need?
- What If I Find A Better Mortgage Deal Later?
- Do I Need A Mortgage Broker?
10) How Much Can I Borrow?
Time and time again this is the first question people want to know. Of course, it’s no surprise. How large a mortgage you’re able to receive will have a huge impact on what home you’re able to purchase. Unfortunately, the answer to this question is rarely clear cut, as different lenders will often use different criteria to determine this figure.
Online mortgage calculators can give you a rough idea of how much you can borrow, but the best way to reach an accurate figure is to work with our Yeovil mortgage brokers to apply for a decision in principle. This is an agreement you reach with a lender (also known as an agreement in principle) to determine how much you might be able to borrow from them. Since this only requires a soft credit check and thus will not affect your credit score, this is a great way of finding out how much you can borrow.
9) Will Bad Credit Prevent Me From Getting A Mortgage?
Bad credit is another thing many of our clients are worried about when reaching out to our Yeovil mortgage brokers. Fortunately, a bad credit score will rarely preclude you from acquiring a mortgage entirely. Our professional mortgage advisors have contacts with a huge variety of lenders, many of which cater to those who have had trouble with their finances in the past.
It does need to be said that a bad credit score may mean that your mortgage interest rate is higher, and may prevent you from receiving certain mortgage deals that are reserved for individuals with a high credit score. If this is something that worries you, we’ve prepared an article detailing 5 key ways to boost your credit score.
8) What Different Mortgages Are Available?
Given the massive variety of mortgage information available on the internet, it’s no surprise that some people feel a little lost. To keep it simple, there are three broad mortgage types that your individual deal will likely fall under:
- Fixed Rate Mortgage: This is where your interest rate is fixed at the beginning of the mortgage term. The usual duration is between two and ten years, but some deals may last for longer. This is a good option if you expect base rate rises to continue.
- Tracker Mortgage: This is where your interest rate tracks the Bank of England base rate exactly, meaning it could vary considerably from month to month as changes occur.
- Variable Rate Mortgage: This is where your interest rate will change with market conditions, typically adjusted above a benchmark level specified by your lender. While this too will likely be impacted by base rate changes, this rate is set by your lender, who may or may not choose to change your rate in response.
While these are the three main types of mortgages, there are a number of specific mortgages that feature favourable terms or features for certain applicants, such as buy to let mortgages or shared ownership. If you are interested in reading more about how these broad mortgage types compare, our Yeovil mortgage brokers have prepared an article on fixed mortgages vs discount variable mortgages.
7) What Types Of Income Are Accepted?
Typically, salary will be the primary form of income most lenders will use. However, that does not mean that those with alternative forms of income are unable to acquire a mortgage. There are a number of specialty lenders that accept income in the form of foreign currency, multi-stream income sources such as that generated by a combination of contracted and freelance work, or other income types that fall outside of an ordinary monthly paycheck.
If you are planning on using alternative income sources in your application, it’s best to discuss it with our mortgage brokers in Yeovil to help you find a lender that will be able to cater to your needs.
6) How Does The Mortgage Process Work?
In broad terms, you will save for a deposit, contact a lender either directly or through a broker, choose a house and then make your application for the mortgage. This is a very brief overview, but fortunately, to answer this question properly, our Yeovil mortgage brokers have prepared an entire article explaining how mortgages work.
5) What Does LTV Mean?
Mortgage sites online have a habit of using jargon that many people may not have encountered before. LTV is probably the most common example of this. Explained simply, LTV stands for “Loan To Value Ratio”. What this describes is the ratio of the mortgage loan to the value of the property.
For example, if you take out a £270,000 mortgage loan for a property valued at £300,000, then the LTV is 90% (270000/300000), the remaining 10% would be your equity.
4) How Much Will My Mortgage Cost Per Month?
This will vary greatly with the size of the mortgage you receive and the interest rate you agree with your lender. Fortunately, a decision in principle should give you a solid idea of this figure as well, meaning contacting our Yeovil mortgage brokers on doing so is the best way to get an answer to this question.
3) How Much Deposit Will I Need?
Again, this too will vary with the mortgage terms you agree with your lender. Broadly speaking, the minimum you will be able to pay as a deposit is 5% of the property value. However, paying a larger deposit will often mean you receive more favourable interest rates, and thus could save you money in the long term.
2) What If I Find A Better Mortgage Deal Later?
Remortgaging is a very common occurrence, if anything it is rare to stick with the same mortgage for the full length of your term. Some of the most common reasons for remortgaging is to pay off your mortgage early after your financial situation changes and your original deal does not allow overpayments, or perhaps you would like to move from a fixed rate mortgage to a variable rate should the base rate see a significant decrease.
However, some mortgages do feature penalty fees or early repayment charges, so if you are considering this it’s best to talk it through with our brokers to find the right solution.
1) Do I Need A Mortgage Broker?
No, our Yeovil mortgage brokers don’t take offence to being asked this! It’s a natural question to have after all. The short answer is that you do not explicitly require a mortgage broker to acquire a mortgage as many lenders and banks can be approached directly.
However, mortgage brokers make negotiating the right mortgage deals for their clients their trade, and are expert in doing so. They have speciality knowledge of the various mortgage products on the market and contacts with a huge variety of lenders, including some that can’t be approached directly. While you don’t explicitly need a mortgage broker to acquire a mortgage, you will likely save money on the whole, as a good broker will be able to find you the right mortgage.
Merry Christmas From Our Yeovil Mortgage Brokers
Finances are probably the last thing you want to be fretting over during the Christmas season, but it’s the perfect time to do so if you’re looking to apply for a mortgage next year. If that describes you, then by all means contact us on 01458 772 040 or by email at admin@thelevelsfinancial.co.uk. We’d be happy to talk through your needs and find the right mortgage for you.
If we don’t speak to you beforehand, Merry Christmas from The Levels Financial.
It’s Important You Know…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
