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Searching for an appropriate mortgage deal may prove to be a time consuming process. The internet will end up facilitate the application process in the majority of cases. At the present time a great number of lenders have an online representation and can display their typical mortgage rates over the web. Use the web to get through to lenders to compare mortgage products. The mortgage broker's advisor should be able to advise you on a suitable
What is a mortgage?
In simple terms a mortgage is a lump sum organised to purchase a house, paid back over a defined period. The normal repayment period of a mortgage loan is up to 25 years however it can be revised to suit your individual situation.
A mortgage is made up of two definite elements : the capital (the lump sum received) and the interest (the fee charged by the mortgage provider for the benefit of receiving the principal amount).
There are in actual fact two kinds of mortgage loans :
A repayment mortgage loan repays both the capital and the interest over the term of the mortgage. Assuming that the agreed monthly repayments are met regulary and on time, a repayment mortgage loan assures that the totality of the mortgage debt will be settled at the finishing point of the loan agreed term.
An interest only mortgage pays back only the interest on the amount borrowed - for this reason the "interest only" name. Since the mortgage capital is not included in this type of mortgage product, you have to make your own provision to guarantee the capital is reimbursed before or at the end of the mortgage agreed term. Popular ways of arranging this style of mortgage are via investments or savings products such as pension plans or alternatively the capital could be paid by the resale of the property.
Determining which sort of loan repayment approach is the best for you can be governed by your individual employment and financial circumstances.
With a repayment mortgage product you benefit from the assurance that your property will be fully repaid at the end of the loan. Still at the start of your loan the bulk of your repayments will be payment of interest rather than repayment of the principal amount. If you have to move property on a regular basis or re-mortgage to secure a better mortgage rate, you may realise that a small percentage of the principal gets paid back.
With an interest-only mortgage, if your investments or savings plans perform better than expected, you could repay the capital quicker than projected, decreasing the length of the loan and as a result saving money on interest. Before deciding about the kind of mortgage product which is right for you, we advise that you speak to a qualified mortgage advisor.
What amount can I obtain from a mortgage lender?
Despite the fact that there are no defined definitions as to how much a mortgage company is willing to lend, by and large if you plan to aquire a house as your principal residence, lenders could lend around a maximum of x 5 your joint gross annual revenue, depending on your personal circumstances, such as employment status, your credit rating ,etc…
Before you take up an application for a mortgage you are advised to make a budget itemising your different incomes and your monthly outgoings such as electricity bills, phone bills, food and clothing costs, ongoing, credit card repayments and any ofther bills you have every month. Within this budget for the cost of a new home (including new utility bills and council tax). Be sure to add insurance costs in your budget house insurance or repayment protection. Your budget will present you with a fair idea of the amount you might be able to afford
How much deposit do lenders require?
The majority of mortgage providers will offer you a maximum of 90 percent of the current value of your new property, meaning you need a 10% deposit. However, some mortgage providers will give you up to 100% but this type of lending is less competitive and is in some ways a very expensive way to get a loan. A larger deposit of above 15%, will give you a wider variety of mortgage solutions with a more competitive interest rate
Applying for a mortgage loan with a poor credit history
Some mortgage companies can offer mortgage loans for people suffering from a poor credit record (CCJs, defaults, arrears) These mortgage lenders are called sub prime lenders. They will consider any adverse credit mortgage applicant (arrears, ccj's). With the higher risk involved in providing a mortgage to applicants with low credit, these subprime mortgage providers will charge a top level of interest (APR) on the mortgage loan.
With an adverse credit rating (arrears, ccj's) you have got to consider carefully about the expense of applying for a subprime mortgage. You need to secure a higher level of deposit of in some cases 20% or more.
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