What is a mortgage?
A mortgage is a loan borrowed from a bank or lender to help you finance the purchase of a home. When you take out a mortgage, you then make monthly repayments back to the lender to pay back the money you borrowed, with an agreed-upon interest rate. Most mortgages run for 25 years, but the term can be shorter or longer.
What are the different types of mortgages?
Fixed-rate mortgages
The interest rate you pay will stay the same throughout the length of the deal, no matter what happens to interest rates. For example, you could be offered a ‘five-year fix contract’, meaning your rate will not change for the stated period of time.
Tracker mortgages
Tracker loans are which follow the Bank of England base rate (currently 0.1%) – for example, you might pay the base rate plus 3% (3.1%).
Discount rate mortgages
Discount rate mortgages have an interest rate that is set a certain amount below the lender's standard variable rate (SVR). The discount is usually applied for a period of time such as 2, 3 or 5 years. This means whenever your lender changes their SVR your payment will change with it. The SVR is usually changed when the Bank of England change the bank base rate although it can happen independently of this.
Take a look at the different types of mortgages explained in more detail here.
What factors are taken into account when calculating the amount I want to borrow?
Your eligibility for your mortgages can be affected by a number of factors. Some of the most common factors include:
Your income and outgoings - ensuring you can afford monthly payments and have enough contingencies to live comfortably.
How much of a deposit you have saved - a higher deposit could lower your overall interest rate.
Your credit history - a bad credit score can affect your choice of available mortgages and the interest rate you secure.
What type of job you have - standard mortgage applications need a two-year work history listed and need to know your current role does not have a termination date.
Your age - many lenders cap the term length or how much can be borrowed if you’re over 60.
The type of property you want to buy.
Where can I get mortgage advice?
Our advisers here at Charles James will work with you to find the best mortgage option for your circumstances and perfect home. To find out more, get in touch with us today.