Applying for a mortgage is no mean feat at the best of times but in the cost-of-living crisis, it’s even more complicated than ever. Luckily help is at hand with my simple mortgage guide. Read on to find out about different types of mortgages, eligibility criteria, how to apply and most important of all- how you can find the right mortgage for you with a mortgage broker. They do all the hard work so you don’t have to.
What types of mortgages are there?
Before you apply for a mortgage you need to establish whether you are looking for one which is residential, commercial or buy to let. Consider what kind of mortgage would suit you best whether it be interest only, repayment or combined mortgage.
With interest only mortgages your monthly repayments will only cover the interest of the loan so will be less than those of a repayment mortgage. At the end of the term, the amount borrowed will need to be repaid.
Repayment mortgages involve monthly payments to repay the whole loan including interest by the end of the mortgage term. This tends to be 25 years but it can vary.
Combined rates are a combination of repayment and interest only mortgages. This means that just a percentage of the loan is paid off at the end of the period.
With a fixed rate mortgage, you’ll know exactly how much interest is payable for the duration of the deal period.
A tracker mortgage moves in line with the Bank of England base rate so if interest rates go up so will your payments and vice versa.
Offset mortgages can be beneficial to the self-employed or those whose income varies. They can also be used by parents to help children get a mortgage.
Discounted mortgages have an introductory rate but will then follow the Standard Variable Rate (SVR) of the provider as with a standard variable mortgage, not necessarily the Bank of England’s.
If you are building your own home, you may need a self-build mortgage. This covers the plot of land upon which you intend to build your home and includes all materials and labour. Instead of monies being paid out in one lump sum, they are issued in installments so the progress and costs of the build can be monitored in stages.
If you are a landlord and you need a mortgage for a rental property, the interest rates you pay and the required deposit are likely to be higher because buy to lets are a bigger risk for lenders. This type of mortgage tends to be interest only.
How do I apply for a mortgage?
The stronger your application the more likely you are to get the right mortgage for you. It’s well worth taking the time to review your credit status before submission and being prepared for the process.
Look for ways to improve your credit score by ensuring you are registered to vote at your current address and checking that you have no outstanding debts. Obtain free credit reports from the main three agencies- Equifax, Experion and Transunion. If necessary, send notices of correction for any inaccuracies, remove links from any previous partners or properties and pay off any existing debts if possible.
A poor credit history might not rule out any chance of obtaining a mortgage but it will make applying for one a lot more difficult. Online mortgage calculators can give you a rough idea of monthly mortgage payments you could be looking at depending on budget, term of mortgage and total cost of mortgage.
An eligibility checker can indicate which products you’re eligible for and how much you can borrow. Check if your lender offers soft searches when applying for a mortgage in principle. Soft searches are logged as enquiries whereas hard searches will indicate you have made the mortgage application.
What do mortgage lenders look at?
Lenders have certain criteria which determines what they offer. It’s worth bearing in mind that criteria can change so even if you have had a mortgage with one lender in the past that doesn’t necessarily mean that you will be accepted for another.
When considering your application lenders will look at your income, employment status (freelance/employed/ retired/self-employed), your spending habits, regular bill payments and any assets you have. They will also check the electoral roll, any court judgements and credit applications. It’s advisable to have bank statements, pay slips, P60’s, identification documents, proof of address and savings account records readily at hand for easier and quicker submission when requested. Fill out any application forms correctly, fully and honestly.
What mortgage fees will I pay?
Mortgage fees vary from lender to lender depending on the deal being offered. The standard checks that a lender will carry out on a property to check that what you’re paying is worth it incur valuation fees. Booking fees are levied to secure a deal and arrangement fees are charged by the lender for preparing the application. These can be paid upfront or incorporated in to higher repayments. Avoid applying for credit of any kind for at least 6 months before the application and try to keep spending to a minimum to keep your accounts looking as healthy as possible. Close any old inactive accounts.
Why use a mortgage broker to get the right mortgage for you?
Thankfully you don’t have to navigate the choppy sea of mortgages alone. If you use a mortgage broker you can save yourself time, stress and even money in finding the right mortgage for you.
Mortgage brokers will assess your needs and finances to see if you meet the lending and eligibility criteria of different lenders. You will generally have access to far more products and a mortgage broker can handle your application from start to finish so your time is freed up to use better elsewhere.
At Mortgage Light the team cater for all aspects of the mortgage and assurance market and provide essential support and expert advice. Their aim is to ensure that your experience of applying for a mortgage is ‘as simple, stress free and enjoyable as possible.’
Whether it’s buying a new home, a rental property or re-mortgaging, a mortgage broker can scour the markets to find the best mortgage for you. In a rapidly changing market with fluctuating interest rates and mortgage deals, the expertise of highly trained professionals to find the right mortgage and protection is invaluable.
Do you need a helping hand to take that next step? Book your free Mortgage Light consultation today.
Please note that this a sponsored post. All views and opinions are my own.
