What is a mortgage and how do they work

What is a mortgage?

Unless you have a massive stack of cash laying around, getting a mortgage is an essential part of buying a home.

A mortgage is a loan taken out to buy a property, with most terms running for around 25-35 years.

The amount of money you can borrow is based on both your income and your outgoings, along with other affordability checks, as well as other factors like your credit history, how much deposit you can provide and the lenders criteria. It’s always best to find out how much you can borrow when you are looking at properties, so you know which properties are in your price range.

How do mortgages work?

You need to put down a deposit (Usually from at least 5% of the property value) to be able to borrow the rest from a lender.

You will be paying back the amount you borrowed, plus any interest, in monthly instalments until the term is over.

When buying a new-build, there are often buying schemes available, like the Help-To-Buy scheme, to aid you financially in the purchase of your home.

Want to know more? Visit the Help-To-Buy website: helptobuy.gov.uk

What are interest rates?

Think of interest as being the cost of borrowing money. The rate of interest is the size of that cost. The higher the rate, the more it costs.

Fixed rate mortgage

The amount of interest you pay each month stays the same for a period of time, typically between two to five years, depending on the mortgage provider.

Variable rate mortgage

The amount of interest you pay each month can change depending on the wider economic circumstances.

What is a mortgage agreement in principle (AIP)?

An agreement from a bank or mortgage provider offering to lend you the money required to purchase a property (subject to affordability checks, verification of information provided and valuation on the property).

This isn’t a guarantee that you’ll receive the mortgage, but it can work in your favour when making an offer on a property when competing with other buyers.

Where to get a mortgage?

To find the most suitable mortgage, we suggest using a mortgage broker/independent financial advisor (IFA), who will compare different mortgages on the market to best suit your personal needs. Not only do you have their expertise and knowledge to recommend the mortgage, as well as arranging everything on your behalf – but you also benefit from them to support and guide you throughout the process.

Our recommended mortgage advisors are Acumen Mortgages – they balance professional advice from experienced advisers with a unique warmth and personal touch.

Acumen Mortgages

Start your journey today with the help of the new build mortgage experts. New build mortgages are more complex but they are our expertise. We’ve been doing them for over 25 years, and that’s why all the big names trust us to get their customers’ mortgages sorted. This unique position means we’ll get you a mortgage offer faster than the others. We work alongside the builders, solicitors and you to make the process as smooth as possible.

Building serious relationships

Acumen Mortgage Advisers know how the builders work, and they know how we work. By using a relationship that already exists we bypass all the pleasantries and get straight down to business. This means no delays as we’re all talking the same language. The bonus for you is a quicker, smoother process, it’s win, win!

• Access to Exclusive New Build Rates
• Long standing relationships with the UK’s top Builders
• Quick AIP qualification 7 days a week

Help to buy

A long standing scheme to help first-time buyers. Help to Buy provides a popular route into homeownership but is only available to people who want to buy a new-build property, who are First Time Buyers. The home you’re planning to purchase can be worth up to £600,000. Help to Buy equity loans work like this: Step 1: You put down a deposit of at least 5% on legal exchange. Step 2: The government lends you up to 20% of the property’s value as an equity loan. Step 3: You take out a mortgage on the rest of the property’s value (so, if your deposit was 5% and your equity loan was 20%, you’d take out a 75% mortgage). After five years, you start paying interest on the government loan.

Can I use Help to Buy on any house purchase?

The Help to Buy Equity Loan can only be used for new build houses, eligibility relies on it being affordable, and your only property. In 2021, the rules changed and to apply for a new HTB loan, you must be a First Time Buyer. In addition to this, regional caps apply. Generally, this scheme is aimed at those with smaller deposits. It’s also worth remembering that the loan must be repaid after 25 years or when you sell your home – whichever is earliest. The amount you pay will depend on the market value at that time and therefore it could be more than what you have borrowed in the first place. For more information, speak to a Mortgage Adviser at Acumen or read our article about How Help to Buy is Changing.

• Only available on new builds
• Up to 20% of the value of your home interest free for 5 years
• Needs paying back after 25 years

We make mortgages personal

We build relationships that last – so you’re guaranteed the best mortgage advice, best service and best experience from builders, lenders and solicitors. We’re also independent, so you know you will be offered the best deal for your circumstances.

Want to know more? Visit: acumen-mortgages.co.uk

0161 688 1111 | hello@acumen-motgages.co.uk