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Taking out a mortgage is quite a substantial financial obligation - it is most likely one of the most important decisions that will ever come your way.
Firstly, work out precisely the amount of money you can payout each month on regular monthly repayments.
Even while mortgage providers are likely to lend around 300% to 400% of your annual gross income as a measure of how much you can get, the real factor is if you can actually afford it. Looking at the numbers, you may well give the impression that you can afford a house worth £150,000 for example, but this will not take into account the reality that you could have a lot of other responsibilities which might make you overextended financially.
Calculate your monthly budget, allowing for house-related bills for instance, insurance and general upkeep, plus going out, food costs, automobile costs, utilities, savings, additional debts etc. The sum of money that you have left should be the absolute highest amount you can confidently pay out monthly for a mortgage.
When you have calculated the amount of money you can comfortably afford, then find out what's available.
There are basically mortgage products by the hundreds and many good deals in the market place, so it's not necessary to take the first deal that catches your eye.
Surfing the internet is the optimum way to get lots of information on mortgages simply and swiftly, giving you the opportunity to evaluate terms and conditions and therefore locate the best possible offer.
In the event you are considering a discounted or fixed rate, check out whether you are going to be legally bound to the lender even after the special period ends.
Many will exact a financial penalty if ever you try to change to a different mortgage lender within the stated time period after the 'honeymoon' period is finished. Ask about what amounts are charged.
A number of mortgage lenders will include incentives to apply for a mortgage product through them, for example, free conveyancing - which might save you some money - or no brokers fees.
Lastly, consider the small print - a lot of mortgage offers can seem good at first however additional fees might be hiding in the terms and conditions.
Questions to ask a lender before taking a mortgage
Well, you have located a mortgage you like the look of. The next move you should make prior to filling out an application is to make sure that you actually are getting the right offer for you in your present position.
These are the kind of things you should put to a mortgage lender before you make an application:
What is the cost of your application fees?
Setup fees are fees connected to your mortgage application that you will need to pay, for example, an application charge.
These fees vary from provider to provider, and there are those who will exclude them as part of the agreement, therefore do not pay any more than you need to.
What will I pay for the valuation cost?
This is the expense of getting your potential new home valued.
The mortgage lender asks a surveyor to go out and determine the value of the home to substantiate that it merits the mortgage sum.
What amount will my once a month mortgage instalment be?
Make sure that you realistically are able to meet the mortgage repayments with ease.
Will there be room for flexibility in the repayments?
A number of mortgage companies will let you have repayment holidays, or let you make an early instalment without charging you any financial penalties.
Am I permitted to make an increase in a repayment so that I can lessen the total sum of interest to be paid?
Or is it possible to pay a lump sum instalment, without incurring any financial penalties?
Obtaining a mortgage is an immense financial undertaking so it is important that you invest enough time to ensure that you have the best deal for you.
What is meant by a 'mortgage broker'?
Mortgage brokers work as intermediaries between a client and a mortgage company.
The broker will search the marketplace to find the most applicable offer for a borrower, this suggests the client has access to more than a single lender.
Mortgage brokers will then recommend a suitable mortgage package determined by the homeowner's circumstances.
A few brokers present a charge for this service.
What is the meaning of a 'tie in period'?
A tie in period on a mortgage loan is where you are linked to the lender for a set period.
The way it works is that the lender will give you a special deal, for instance, a fixed rate mortgage loan for the initial two years.
Nevertheless, you might be linked to the mortgage company for a set time period. following, a year for example, where you must cover their standard variable rate.
This is a method for mortgage companies to recover money they have 'lost' in furnishing you with a good deal for the initial two years.
Should you plan to swap mortgage lenders while still in the tie in period, you will be required to pay a financial penalty which can add up to thousands of pounds.