A Guide to Mortgages at MAIN
Purchasing a property is likely to be the largest purchase you will make in your lifetime and this guide to mortgages should make things a little easier to understand. Choosing the right mortgage and getting the right advice is imperative. We have created a basic guide to help you understand the different terms and types. However, when arranging a mortgage with MAIN, we will go through all of the steps with you and find the perfect option for your circumstances.
What is a Mortgage?
A mortgage is basically a loan taken out specifically to purchase a property or land.
You can adjust the term to suit your needs, but most will run for 25 years as an average.
The loan is secured against the value of the property/land until the loan is paid off. If you do not keep up your payments, the lender can repossess the property and sell it to get their money back.
What can you afford to borrow?
A lender will always want to assess your affordability using proof of income and bank statements etc. We always invite you in for an free initial meeting to discuss your affordability and in most cases provide an offer in principle the same day. You can then start looking for houses in your price range and take the first step towards buying your first home.
Where to get your Mortgage?
Of course you can go direct to the high street lender, however, this will take you longer and may not be best deal financially. Getting an appointment with the bank, may take anywhere between 3 and 8 weeks. To then compare a number of different lenders will take a long time.
The advantage of using MAIN, we assess over 25,000 different mortgage options to find the most suitable deal for you and can usually offer you a same day appointment. We also have access to exclusive rates and features that you won’t find on the high street.
How much deposit do you need?
When purchasing a property you will need to put down a deposit. This amount will go towards the cost of the property. The higher deposit the better. This is because the higher deposit, the lower the risk to the lender and therefore the lower the interest rate. The average deposit amount is 10% with some lenders offering a 5% deposit.
Different Types of Mortgages
Fixed Rate
The main benefit of taking a fixed rate deal is that the interest rate you pay will stay the same throughout the length of the term.
You have a number of options with regards to fixed rate terms, you can take a two year, five year or ten year fixed rate. By taking a fixed rate mortgage you can budget accordingly and ensure that you know the exact mortgage payment amount, will be the same each and every month.
Variable Rate
The opposite to a fixed rate mortgage, the interest rate can change at any time. If the interest rates rise, you will need to have savings to cover the increase in mortgage payments.
A standard variable rate mortgage is set by the Bank of England base rate. The advantage is that you may have more flexibility with overpaying and have the ability to change lender at any time.
Tracker Rate
A tracker mortgage will run alongside another interest rate, which is usually the Bank of England base rate, plus an additional percentage. Therefore, if the base rate increases, your rate will increase by the same amount.
A tracker mortgage is usually a short term option of between two and five years. The advantage to taking a tracker rate is that if the base rate drops, so will your rate. The disadvantage is that if the rate increases, so will your rate.