Mortgages

Definition

“A legal agreement by which a bank, building society, etc. lends money at a pre-determined interest rate secured against the debtor’s property, on the understanding that the conveyance of title becomes void upon the repayment of the debt”

Most people, when they buy a property, have to borrow some money. Known as a residential, or ‘owner-occupier’ mortgage, these are long-term loans typically provided by bank or building societies, which are secured against the property itself.

The capital sum borrowed, and any accrued interest are repaid over an agreed fixed ‘term’ which has traditionally been over 25 years or up to state retirement age. However, with new restrictive lending and affordability criteria, many mortgages are taken for up to 40 years to keep repayments low. While more ageist criteria is impinging on older borrowers even getting mortgages.

Choosing the right product

In today’s environment, where there is once more an ever-increasing number of products offered by a wide variety of lenders, these choices, and the compliance regime, can seem daunting.

There are the usual questions, such as the type of loan you should go for — fixed, tracker, flexible etc. In the current market, lenders are far stricter with their lending criteria and it has become increasingly more difficult to obtain acceptance, and  a mortgage offer from the preferred lender.

Most residential mortgage providers now require a minimum deposit of at least 10% of the total value of the property, although some lenders are once again lending at 95% Loan-To-Value, (LTV). The most economic products, however, are available for those borrowing 60% LTV or less, with the rate rising gradually as the borrowing increases for each 5% increase in borrowing.

Obtaining a Mortgage that’s Right for You

Your credit history, alongside your income, or joint incomes, will have an influence on your ability to obtain a mortgage.

Everyone should want their residential mortgage to be at a competitive interest rate, but also have a product that suits their lifestyle and needs. For example, if their income fluctuates from month to month, or they receive hefty annual bonuses, a flexible mortgage will allow payments to fluctuate according to their variable income.

Those who prefer to know exactly what their mortgage payments will be from one month to the next are better suited to a fixed rate mortgage, as this provides a predetermined monthly payment for the term of the fixed rate contract.

For those of you that are confident that the current interest rates will not fluctuate significantly for some time, then you might opt for a tracker mortgage that will follow the Bank of England Base Rate. That’s provided that you’re aware of the risk that your mortgage payments could rise.

Choice is the wonderful, but it is also the problematic as there are so many different mortgage providers offering hundreds of products, which can make identifying the most appropriate mortgage extremely difficult.

In addition, our stated policy of transparency means our clients are made aware of the fees that we charge them for our advice and recommendation service and any procuration fees we may be paid for introducing them to the lender.