Frequently Asked Questions

 

MORTGAGES - YOUR QUESTIONS ANSWERED

How much can I borrow?

The amount that you can borrow depends upon two main factors; your salary and the current market value of the property you propose to buy. Most lenders will lend up to three and a half times your current income, or for joint purposes, three and a half times the salary of the highest earner, together with the salary of the lower earner, or up to 3 times the joint income. Some lenders will take into account guaranteed overtime and bonuses and some may only allow 50% of these. Confirmation of your salary will be required from your employer.
With regard to the current market value of the house to which the mortgage relates each lender will have a maximum percentage of the value that they will be willing to lend in each individual circumstance.
One other factor which may affect how much you can borrow is credit details. A credit check will usually be undertaken before a mortgage is offered.

What are the different types of mortgages?

There are several different types of mortgages, the main ones being:

• Repayment
  A single payment is made to your lender each month covering both the interest charged on the loan as well as the repayment of the outstanding capital. Providing you maintain the payments for the entire term of the mortgage you are guaranteed to repay the loan at the end of your selected loan period.
• Interest Only
  The lender agrees to charge purely interest throughout the term of the mortgage. The capital amount is to be repaid at the end of the period agreed. Normally a lender will ask you to establish a repayment vehicle at the outset of the although this is not always the case. Each month you have to make two separate payments, one to the lender and one to the investment you have selected to repay the loan. It is possible that your investment may provide a surplus lump sum or pay of your mortgage early, on the downside there may also be a shortfall in the fund.
• Pension Policies
  For those who are self employed, a pension mortgage can be tax efficient. Most pension plans have the option at maturity to withdraw a percentage of the fund as tax free cash.
• Fixed Rates
  The rate is guaranteed to stay fixed for a specific period, after which it can be expected to revert to the lenders standard variable rate.
• Capped Rates
  A form of variable rate where the rate stated is guaranteed not to rise within a specified period. It may fall during the capped period and can be expected to revert to the lender's standard variable rate at the end of the capped period.
• Discounted Rates
  Discounted rates are offered for a set period of time, the reduced amount will be linked to the lender's variable rate. This type of mortgage is suitable for those on a tight budget who are expecting wage increases over the first few years of the mortgage.
• Variable Rate
  The traditional type of mortgage interest rate which fluctuates depending upon the base rate set by the Bank of England.
• Cashback
  Some lenders offer new borrowers a variable rate mortgage with cashback, a lump sum which is normally a percentage of the loan. Suitable for first time buyers.
• Current Account
  A relatively new introduction to the mortgage market, this mortgage allows you to put all your money in one place and therefore your interest payments are reduce

What is re-mortgaging?

Re-mortgaging is switching your loan to a new lender to receive more favorable rates of interest. It is important to ensure that your current mortgage does not have unfavorable redemption penalties. It may be worth us talking to your existing lender to look at obtaining better rates without moving the loan.

What happens if I move house?

Many mortgages are portable meaning that if you move you can move it onto your new property if you sell the original property on. When you are taking out a mortgage and think that you may move house again within a few years you should check what early redemption penalties you may face.

What are the costs involved in setting up a mortgage?

The following costs may be incurred when arranging a mortgage:

• Arrangement Fee
  Some lenders may charge a fee for arranging a particular kind of mortgage.
• Booking Fee
  Some lenders may charge a fee to guarantee funds in reserve.
• Valuation Fee
  A valuation is required to assess the value of the property you are borrowing the loan against.
• Mortgage Indemnity Guarantee
  This premium is generally payable when a lender is lending more than 90% of the valuation of the property.

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