2 minute read
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 Mindful Mortgages – they balance professional advice from experienced advisers with a unique warmth and personal touch.
Mindful Mortgages capture the emotion of buying a home. For them it’s not just about finding the right financial solutions for you, it’s about connection. Real, honest and heart-centred connection. They’re experience and knowledge gives brings their customers an intuitive, soulful and compassionate service. They’ll help you investigate options that feel authentic to you, because they work for you, not for the lenders. Through a holistic approach, where names matter more than numbers, customers are at the centre of all that they do.
- UK Coverage
- Whole of market
- Experienced team of professionals
- Put you and your home at the core of what they do!
Want to know more? Visit the Mindful Mortgages website: mindfulmortgages.co.uk