Everything You Need To Know About Mortgages
For first-time buyers there is a lot of information to learn when it comes to mortgages. From the thousands of deals available to choose from, to learning the finance-related jargon used by lenders. To make things easier, we explain everything you need to know about mortgages.
Mortgage lengths
The length of a mortgage term is calculated according to your individual circumstances and age. When making a mortgage application you have the choice to repay your loan over a shorter or longer term if you prefer. What you should bear in mind when asking for a longer deal is that although monthly payments will be lower, in the long run you will end up paying more interest. A shorter mortgage repayment period will generate higher monthly repayments.
Loan to Values (LTV)
If you see the acronym LTV next to a percentage figure, this tells you how much of the property’s value you can borrow. For example, if a mortgage features an LTV of 80%, then you are able to lend 80% of the property’s value. The remaining 20% would have to be covered by the deposit. The general rule is the higher the LTV, the higher the mortgage rate.
Fixed and variable rate mortgages
A mortgage will either offer a fixed or variable rate. A fixed rate remains in place as long as the mortgage is in place. This ensures you always know what your mortgage repayments will be every month, allowing you to budget accordingly.
The money repaid with a variable rate mortgage can change in line with interest rates. This means payments can go up and down. You then have very little control over your monthly budget and your future is heavily reliant on the current state of the economy. Your disposable income can be severely affected if you have to pay more towards a higher mortgage if interest rates increase.
At Asquith Financial Services, we always take the time to understand your personal situation to help you find the right mortgage that suits you. If a fixed rate mortgage gives you more peace of mind, we will match the right product to your financial status.
Fixed rate mortgage lengths
The majority of fixed rate mortgage products are available for between 2-5 years. Some lenders may offer a deal that lasts as long as 10 years. While these mortgages can usually be transferred to another property if you move, any additional money required will likely be at a different rate.
Tracker and discounted mortgages
Tracker mortgages are essentially variable deals. They follow the Bank of England base rate, with an added percentage added on top. As the rate goes up and down, so will your mortgage repayments. Discounted mortgages are also variable, providing a small discount off the lender’s standard variable rate for a set period.
Early Payment Charge (ERC)
If you want to pay off your mortgage early, or remortgage using a different lender during the period of your existing deal, then you will be liable for an ERC. This only applies to fixed or discounted rate mortgages.
Interest only mortgages and repayment mortgages
Interest only mortgages require you only pay the interest owed every month and not the money you have borrowed. Lenders will want to check you are saving enough every month to ensure you can pay the borrowed money back when the mortgage deal finishes. A repayment mortgage asks you to repay some of the borrowed money and the interest every month.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
Are you considering a mortgage?
If you are thinking about taking out a mortgage, it is recommended to talk to a financial adviser for guidance on finding the right policy for your personal situation. If you enjoyed reading our article we offer high-quality mortgage advice out of Colchester, Essex. You can get in contact with us today by calling 033 3303 4230 or e-mail [email protected].
For first-time buyers there is a lot of information to learn when it comes to mortgages. From the thousands of deals available to choose from, to learning the finance-related jargon used by lenders. To make things easier, we explain everything you need to know about mortgages.
Mortgage lengths
The length of a mortgage term is calculated according to your individual circumstances and age. When making a mortgage application you have the choice to repay your loan over a shorter or longer term if you prefer. What you should bear in mind when asking for a longer deal is that although monthly payments will be lower, in the long run you will end up paying more interest. A shorter mortgage repayment period will generate higher monthly repayments.
Loan to Values (LTV)
If you see the acronym LTV next to a percentage figure, this tells you how much of the property’s value you can borrow. For example, if a mortgage features an LTV of 80%, then you are able to lend 80% of the property’s value. The remaining 20% would have to be covered by the deposit. The general rule is the higher the LTV, the higher the mortgage rate.
Fixed and variable rate mortgages
A mortgage will either offer a fixed or variable rate. A fixed rate remains in place as long as the mortgage is in place. This ensures you always know what your mortgage repayments will be every month, allowing you to budget accordingly.
The money repaid with a variable rate mortgage can change in line with interest rates. This means payments can go up and down. You then have very little control over your monthly budget and your future is heavily reliant on the current state of the economy. Your disposable income can be severely affected if you have to pay more towards a higher mortgage if interest rates increase.
At Asquith Financial Services, we always take the time to understand your personal situation to help you find the right mortgage that suits you. If a fixed rate mortgage gives you more peace of mind, we will match the right product to your financial status.
Fixed rate mortgage lengths
The majority of fixed rate mortgage products are available for between 2-5 years. Some lenders may offer a deal that lasts as long as 10 years. While these mortgages can usually be transferred to another property if you move, any additional money required will likely be at a different rate.
Tracker and discounted mortgages
Tracker mortgages are essentially variable deals. They follow the Bank of England base rate, with an added percentage added on top. As the rate goes up and down, so will your mortgage repayments. Discounted mortgages are also variable, providing a small discount off the lender’s standard variable rate for a set period.
Early Payment Charge (ERC)
If you want to pay off your mortgage early, or remortgage using a different lender during the period of your existing deal, then you will be liable for an ERC. This only applies to fixed or discounted rate mortgages.
Interest only mortgages and repayment mortgages
Interest only mortgages require you only pay the interest owed every month and not the money you have borrowed. Lenders will want to check you are saving enough every month to ensure you can pay the borrowed money back when the mortgage deal finishes. A repayment mortgage asks you to repay some of the borrowed money and the interest every month.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
Are you considering a mortgage?
If you are thinking about taking out a mortgage, it is recommended to talk to a financial adviser for guidance on finding the right policy for your personal situation. If you enjoyed reading our article we offer high-quality mortgage advice out of Colchester, Essex. You can get in contact with us today by calling 033 3303 4230 or e-mail [email protected].
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