A mortgage is the biggest financial decision most people make in their life. With so many options and products available it can be complicated and daunting to know what is right for you and your circumstances.
At Carnegie Mortgage and Protection, we guide you through the process making it as stress free and simple as possible while recommending the best products based on your individual needs from the whole of the Market.
What is a Mortgage?
In its simplest form a mortgage is a loan taken out to buy property or land. The mortgage provider lends funds to the borrower to buy a house or land which are secured against the property. The term ‘secured’ means if you cannot repay the loan the lender can repossess your property to regain the money, they have lent you.
The lender will charge interest which is normally repaid in monthly payments. You can also choose to repay the money borrowed with each monthly payment. This is known as a repayment mortgage. Alternatively, you can just pay the interest each month, this is known as interest only. With this method you need to have a way of repaying the loan at the end of the mortgage term.
The key components of a mortgage are as follows:
Capital: the money given to the borrower by the lender
Interest: the charge for borrowing the funds. Interest is calculated as a certain percentage of the full mortgage loan.
Rate: this is the amount of interest charged. Sometimes rates are fixed meaning they will not change over a period and sometimes they are variable meaning they can change.
Term: the number of years the mortgage is to be repaid over.
Deposit: The funds you put towards the purchase of your property
Lender: the institution providing the funds. Normally a Bank or Building Society.
Obtaining a Mortgage
Mortgage providers have a set of rules and policy that sets out the criteria required for borrowers. Different lenders have different criteria and some lenders may provide a mortgage with you where others may not. The advisers at Carnegie Mortgage and Protection can provide expert advice to make sure you apply for the right mortgage first time.
The typical factors considered in a lender’s decision to provide a mortgage are as follows:
Historically, lenders would decide how much someone could borrow by applying a basic income multiple.
Nowadays they apply a more complicated set of rules. The key factors are income from employment such as salary and bonuses but can include other income sources such as benefits and outgoings such as credit commitments like car loans.
Other factors can be if you have dependents such as children, the number of years you pay the mortgage over amongst other things.
Lenders will require to put some cash into the purchase of your house. This is known as a deposit.
You will typically need a minimum deposit of least 5%. Generally, the more you can put down the more choice and the better rates you will have access to.
The source of the deposit may come from your current property, savings, inheritance, or a gift.
Be aware that deposit loans from family and friends may not be accepted as a source of deposit by some lenders.
Lenders will assess an application based on you the borrower and based on the property as well. Lenders will not lend on some properties. For example, properties such as flats over commercial properties, studio flats and ex-local authority premises can be viewed as having reduced future attractiveness and as such some lenders may not operate in that market.
Other factors can be the state of repair of the property and the construction type.
Listed buildings (e.g. Grade 1, Grade 2) may have restrictions on how you can maintain or alter the property as well as buildings near to it (e.g. garage). Some unlisted properties can also be subject to similar restrictions (e.g. in an area of outstanding natural beauty).
We have an easy-to-use mortgage calculator you can use to calculate how much you can borrow in the UK for your home.
If you want for precise calculations, our team would be happy to support your enquiry. Visit our contact page to get in touch.