Getting a mortgage

How to get a mortgage in the UK?  Firstly getting a mortgage offer in principle should be your aim.  When buying a property, you need to work out how much you can afford to borrow from a mortgage lender and how much you can afford to pay back in monthly mortgage payments. 

Compare mortgage rates and arrangement fees for your preferred loan amount. There is no substitute for getting out a calculator and working out how much you will pay back on the mortgage over the whole term. 

A fixed rate mortgage or tracker mortgage may look a good deal but if the mortgage arrangement fee is high - or a percentage of the loan then it may work out cheaper to pay a higher mortgage rate and a lower arrangement fee.  Options to suit your personal circumstances such as lower starting payments which are increased after a number of years may be the deciding factor.

Work out the total value of mortgage payments paid back from different mortgage lenders such as banks, building societies during the term, or at least over the next 5 years or fixed term.  Get a mortgage offer in principle and get it in writing.

What is a mortgage? 

A mortgage is a loan secured by the property you arrange the loan (mortgage) for.  In other words the property is the collateral in case you become unable to pay the mortgage payments. This is why the mortgage lender goes to great lengths to ensure that the property value is equivalent to the loan they make against it.  

Mortgage rates vary depending on the deposit you have available.  The credit crunch has reduced availability of mortgages as lenders try to limit their exposure to high risks.

Mortgage Deposit 

What deposit will I need for a mortgage? 

Generally deposits required for the mortgage are 10% of the loan. 

Although shared equity mortgages are a way for first time buyers to buy a home with just a 5% deposit. However interest rates will be higher the lower the deposit.

 Raising a larger deposit of say 10 to 25% will unearth the best mortgage deals with lower interest rates.

First time buyers' mortgages

First time buyer mortgages are available, but even with a 10% deposit banks are keen to check credit scores with the UK's credit reference agencies and will also have their own criteria for lending including criteria which indicates security such as length of time in a job. New mortgage market review (MMR) rules recently came into effect to avoid mortgage lenders overstretching their available income. However the good news is that the Government have introduced Affordable home Ownership schemes. Types of scheme are the Help to Buy: Equity loans (for first time buyers and home movers) and Help to Buy: Mortgage guarantees (for first time buyers). The Government guarantee your loan. See Gov.uk website link at property resources here>

Mortgage Brokers

Mortgage Brokers and Independent Financial Advisers can reduce the time to acquire a mortgage by avoiding pitfalls and pointing the way to the best mortgages. A Mortgage broker or Financial Adviser should always disclose their method of payment via a commission or payment from the lender for instance. 

FSA ( Financial Services Authority)

Check that any mortgage broker is registered with the FSA, Financial Services Authority, who have a strict code of regulation and a Financial Services Compensation Scheme (FSCS) where FSA members go out of business.

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