Understanding mortgages
Getting a mortgage means convincing a lender to provide most of the value of the home you want to buy (minus the value of your deposit), in advance. They need to be able to trust that you can pay back the loan, with interest, over a period of years, so you need to provide solid evidence that you’re a good bet financially. That normally means having a good credit history, a dependable source of income and as big a deposit as you can manage.
It’s worth stressing that when you borrow money against a property, the lender uses that property as ‘security’ on the loan. This means that if you fail to repay your mortgage as agreed, your home could be repossessed by the lender and sold in order to recoup the amount owed to them.
Types of mortgage: which should you choose?
There are several different types of mortgage available, and the choice and financial jargon can often be confusing for first-time buyers.
- Repayment mortgages are the norm: with a repayment mortgage you pay back a proportion of your loan, plus interest, every month.
- Interest-only mortgages only cover the interest on the loan, so at the end of the mortgage you will still owe the lender the value of your property.
- Fixed-rate mortgages mean that the amount you repay each month is set in stone from the beginning, so they won’t be affected by interest rates.
- Variable-rate mortgages change with the economic climate, so you can’t know in advance exactly what you’ll be paying back. One common type of variable-rate mortgage is a tracker mortgage, whose rates change in line with the Bank of England base rate.
We’ll guide you through the choices available to you, and offer independent advice to help you to find a mortgage that’s right for you.
Mortgage Calculator
Take a look at our Mortgage Calculator to work out your monthly payment, just click on the button below:
Mortgage Calculator
Other factors to consider
A mortgage can be a 5-40 year commitment, so there are some other things to think about before signing on the dotted line.
- Is it flexible – can you overpay if you find your financial situation improves and pay off your mortgage sooner?
- Is it easy to move your mortgage if you find a better deal, or will you face hefty fees?
- Can you move, sometimes referred to as ‘port’ your mortgage to another house if you need to in the future – for example if you want a bigger house or need to move location?
- How much will you need to pay in insurance, solicitor’s fees, stamp duty and other expenses?