Have a question? Ask our experts!
A mortgage is a loan that is secured against a property (this means the loan is attached solely to the property). This large loan enables you to buy the property. You agree to repay the loan over a period of time decided between you and the lender. There are thousands of mortgage repayment plans from lenders throughout the UK.
The mortgage loan has two components - the capital, which is the amount of money you paid for the property, and the interest, which is what the lender charges for loaning the money. Since the loan is secured to the property, if you do not keep up with mortgage repayments, the lender can repossess the property and sell it on to recover the lender’s money.
Generally you’ll need between 5%-40% of the price of the property as a lump-sum deposit on the loan. The deposit required depends on which lender and mortgage are chosen.
This depends on the results of your affordability assessment, which is where your income (which will be combined if you’re not buying alone), your total outgoings, the cost of the loan, the deposit, and other factors are taken into account. Our advisers are on-hand to help you find out if you can afford a mortgage, and if so, how much you can borrow.
There are many different types of mortgages. We sift through thousands of mortgage loan deals from lenders through the UK to find the right one tailored for you. Within all these mortgages, there are two main types - repayment and interest only:
This is a straightforward plan, and still the most popular type of mortgage. The borrower repays an agreed amount each month, over a period that lasts commonly between 20-30 years. You can have a shorter mortgage if you have a large deposit and/or a cheaper property. Once the capital and interest are fully paid, you own the property. You can remortgage (switch to another mortgage) to get a better deal, such as a lower interest rate on your loan, throughout the mortgage period, depending on your personal circumstances.
This is where you only pay the interest on the loan for the duration of the mortgage, and do not pay back the loan itself. This is suitable if you want cheaper monthly repayments, and are gathering money elsewhere through investment plans, such as ISAs, and other methods. You will need to have the means to pay off the loan by the end of the mortgage, or the property goes back to the lender.
For more information on different types of mortgages, including remortgaging, go to the Choose The Right Mortgage page on our website.
The lender will want to see your recent payslips or, if you're self-employed, typically the past three years of accounts, plus any other income you'd like to be included. You'll also need recent bank statements so your total outgoings can be established, such as bills and any loans or credit card payments. You may be asked for any insurance policy details, investment plans and endowment arrangements. ID will be requested too, such as a passport – please talk to our advisers for more information.
We can't put a fixed price on the fees, since the amount varies from sale to sale. However, you will typically encounter the following fees:
The booking fee - otherwise known as a 'reservation' or 'application' fee – 'books' your loan as the application goes through the lender. It usually costs around £99. Some lenders don't charge this fee, and if they do, it's non-refundable if the loan doesn't go through, or you don't take up the mortgage.
Arrangement fee - this is what you pay the lender to set up the mortgage. These vary – they can be £1,000, or £2,000, or more. It's important you factor in the arrangement fees when you choose your mortgage, since they can be costly. Some lenders will add this to the mortgage itself, though you will then pay interest on the arrangement fee cost. Our advisers will make sure you're aware of all fees and exactly what they cost before you go ahead with any mortgage.
Valuation fee – the lender will send a surveyor to make sure their loan is going on a secure property (e.g. it is structurally sound). This fee varies, and some lenders don't charge a valuation fee. Again, our advisers will give you all the details of this fee, depending on the mortgages selected for you.
Conveyancing and legal fees – you will need a solicitor or conveyancer (a person trained in property transfers). Conveyancing is the process of transferring the property from the seller to the buyer. The solicitor or conveyancer will do all the checks, such as ensuring the seller really owns the property; future local planning that might affect your property, and other searches, such as ensuring there is no land subsidence or damp. This process can cost a few hundred pounds, but again it depends on the lender. Some include it in the mortgage.
Stamp duty – all properties that cost over £125,000 will pay stamp duty to the government. This starts at 2% for properties up to £250,000, and raises gradually to 12% for properties over £1.5 million.
Fees to a broker, such as CARA Mortgage Services
– we charge a fee of up to 1% of the amount borrowed for finding you a mortgage and advising you through the process. Typically, we charge less, with an average of 0.3% of the amount borrowed.
Payments after completion of sale – you'll have moving costs, service charges on your new home, perhaps ground rent. Building and contents insurance. Protection insurance on your mortgage in the case of illness or any other factors where you cannot pay your mortgage for a period. For all additional fees apart from the repayment of the mortgage itself, contact our advisers who will guide you through the process.
When you first buy, you'll typically get about a two-year deal with the lender. A few months before this period ends, ask our advisors if you can get a better deal elsewhere by remortgaging, or if it's cheaper to stay with your current lender, who may offer you an excellent loan deal to stay with them. We will advise you of the right course of action for yo.
If you're able to repay your mortgage early, your lender will probably charge you. The amount will depend on how much money you still owe and their charge. For example, if you can pay off the remainder on the mortgage, which is, let's say, £100,000, and the lender has an early repayment charge of 3%, you'll pay £3,000.
Generally, a mortgage term will be calculated up till the age of 65. If you can prove you have the financial means to keep paying your mortgage up till 70, it might be extended. This affects the maximum age you can be when you apply for a mortgage. If you have a huge deposit, you can get a short mortgage lasting only a few years.
The maximum age you can be as a mortgage applicant is a part of criteria lenders are continuously reviewing and therefore it’s best to check with your CARA Mortgage Services adviser on any recent changes
If you haven't bought a property with a buy-to-let mortgage, and wish to move out of your home in order to rent it out, the lender may increase the interest rate, since renting out a property is considered an additional risk to the lender.
We have lenders who specialise in different markets, including customers with bad credit. Talk to one of our advisers to see how they can help you.