So, let’s start off and ask the simple question, what is a Mortgage?
A mortgage is a loan you can use to help you buy property. The average mortgage lasts for 30 years but they can range from six months to 40 years. During this time, you will make monthly repayments. It’s secured against your home, which means you may lose your home if you can’t keep up with the repayments.
This is the amount you have to put towards the cost of the property you’re looking to buy. The more you can put down the better, it will mean you will have less you will need to borrow as a mortgage and the better the mortgage rate you could be offered.
A deposit is a percentage of the property’s value, so for a property for £300,000, a 10% deposit would come to £30,000.
Your mortgage leader will provide the remaining 90% of the purchase price.
Banks and mortgage providers assess the risk in part by the amount of money you need to borrow relative to the property value, this call the Loan to Value or LTV.
If a property is valued at £650,000 and you need a mortgage of £390,000 this would be an LTV of 60%.
Banks and Building Societies lend most UK mortgages, there are two main ways you can look for a mortgage
You can get a mortgage directly from the lender – like a Bank
You could find a mortgage and get advice from a Mortgage Broker or Independent Financial Adviser. Some are whole-of-market, which means they can offer mortgages from every lender, and some offer exclusive deals. We are partnered with Mortgage Advice Bureau who would be happy to support you in finding the right Mortgage for you.
This will all depend on how much you borrow, this is an example of what that cost could be.
For example, if you took out a £300,000 mortgage with an interest of 5% over 25 years, you could pay interest of £226,131 and repay a total of £526,131.
The mortgage above could cost around:
£1,754 per month with an interest rate of 5%
Variable mortgage rates can change at any point, although they usually rise and fall roughly in line with the Bank of England base rate.
Fixed rate mortgages guarantee that the interest rate will not change for a set period, usually between one and five years.
Interest only mortgage your monthly payment covers only the interest charges on your loan, not any of the original capital borrowed. This means your payments will be less than on a repayment mortgage.
Tracker mortgages have variable rates that follow the Bank of England base rate exactly. A mortgage set at 2% above the base rate would be 2.5% with the base rate at 0.5%. If the base rate later went up to 1%, the mortgage rate would change to 3%.
We would advise to talk to someone who can talk to you about all the options you have, if you wish for Belvoir to support you with this then please do get in contact.
