Mortgages FAQs
Here are our most commonly asked questions about mortgages
What is a mortgage?
A mortgage is a type of loan that enable people to buy property.
In return for lending you money through a mortgage, your lender will charge you interest
Mortgages are also secured against the property you’re buying, so your lender may be able to repossess your home if you fail to pay back your loan.
How much can I borrow?
The amount of money you’re able to borrow through a mortgage is likely to depend on:
The price of the property you want to buy
- The amount you have as a deposit
- Your income and affordability
- Your lender’s individual criteria
What is a remortgage?
Remortgaging is when you take out a new mortgage, but on the property you already own rather than a new one.
Remortgages are often taken out by property owners when their current mortgage deal expires, and they want to secure a more competitive rate through a new lender.
Some people also remortgage to borrow more capital.
What is conveyancing?
Legal work undertaken by a solicitor when you buy or sell a property is known as conveyancing.
Because conveyancing is often the slowest part of a property transaction, having your chosen solicitor or conveyancer in place before you sell or buy a new property can help keep things on track.
How do I prove what income I have?
To take out a mortgage, you’ll need to prove to your lender that you can afford to pay it back.
That means you’ll need to show your lender proof of your income.
If you are employed, you’ll need to provide at least three months’ recent payslips and often an annual P60 to show your salary.
If you’re self-employed, your lender may request an SA302 form showing your tax projection and at least two years of certified accounts to prove your business income.
Lenders often request three months of bank statements, too, showing what comes into your account and what goes out.
How long do I take my mortgage out for?
Most mortgages are taken out on a 25-year term, but this can vary depending on your affordability, lender’s terms, and your age.
Speak to a mortgage advisor, who will be able to run through your options.
How do I choose the most suitable mortgage for me?
To weigh up the right mortgage for you, you’ll need to consider your personal circumstances and long-term plans.
Speaking to a mortgage advisor can help.
How do I choose the most suitable mortgage for me?
Choosing the right mortgage for you can be daunting – especially if you’re a first-time buyer, because there are usually so many deals to choose from.
To weigh up the right mortgage for you, you’ll need to consider your personal circumstances and long-term plans.
Speaking to a mortgage advisor can help.
What fees might I incur when taking out a mortgage?
You could be charged a range of fees when you take out a new mortgage.
Those fees could include:
- Valuation fees – charged by the lender to complete a valuation on the property you’re buying
- Solicitor fees – charged by your solicitor or conveyancer for legal work to complete your sale or purchase
- Stamp duty – if you’re buying a property costing more than £125,000, you may have to pay stamp duty land tax unless you’re a first-time buyer
- Arrangement fees – your mortgage lender may charge you a fee to arrange your mortgage. This fee can sometimes be added to the loan, but doing so will mean you pay back more
- Booking fees – some lenders charge booking fees to ‘book’ the funds for your mortgage
Do I have to repay my mortgage by a certain age?
Whether or not you have to pay back your mortgage by a certain age is likely to come down to your lender’s terms.
To find out more, speak to a mortgage advisor.
What is the difference between a standard variable rate and a Tracker Rate?
Standard variable rate (SVR) mortgages are loans charged at the lender’s normal mortgage rate, with no discounts or special rate periods applied.
SVRs can go up or down, usually in line with the Bank of England’s base interest rate, and this means your monthly mortgage payments can go up or down, too.
Tracker mortgages also follow the Bank’s base rate, with the interest rate you pay usually slightly below that rate.
Because trackers follow the base rate, your mortgage payments can increase or decrease.
However, while a standard variable rate mortgage often has no early repayment charges, a tracker rate mortgage usually comes with a tie-in period.
What is a Higher Lending Charge?
If the amount of money being borrowed by a buyer is more than the value of the property, lenders may put in place a Higher Lending Charge (HLC).
In most cases, lenders will use this fee to purchase an insurance policy to protect them from losses should the buyer get into financial difficulty and struggle to pay back their mortgage.
What is an Early Repayment Charge?
When you take out a fixed, tracker or discounted rate mortgage, your lender will usually tie you into that deal for a certain time.
Early repayment charges are usually charged as a percentage of the outstanding mortgage.
What if I want to rent out my property?
If your property has been bought with a standard residential mortgage, but you wish to rent it out to tenants, you may have to get your lender’s permission to do so.
You may also be charged a higher interest rate if your lender moves you on to a buy-to-let mortgage.
What if I lose my job or I am having difficulty paying my mortgage?
The most important step to take if you’re having difficulty paying back your mortgage is to let your lender know as soon as possible.
Most lenders have dedicated helplines and facilities that can help and advise you if you’re having financial problems.
Do I need insurance with my mortgage?
If you’re buying a property with a mortgage, your lender will insist you take out an adequate buildings insurance policy to protect your home and their money.
While other insurance policies, such as life insurance and contents insurance, usually aren’t a requirement, you should consider them to protect you and your investment.
If I do an Agreement in Principle (AIP) with this lender, what will I do if a better product comes up before my application?
A mortgage Agreement in Principle (AIP) doesn’t tie you to the lender that issued it and if you have an AIP but then find a better deal elsewhere, you can explore that latter option.
An AIP simply tells you that the lender is willing to consider your application for a certain amount of money based on information you’ve provided.
It doesn’t mean they will definitely lend to you, nor does it mean you will definitely borrow from them.
Is there a particular mortgage term I will be stuck with or do I have a choice about that?
Your mortgage term can affect your monthly repayments so affordability is one factor you, and your lender, will consider when weighing up your options.
A shorter mortgage term could mean you’ll pay less interest, but your monthly repayments will be higher as they’ll be spread over a shorter time.
Seek advice from a mortgage advisor about the best term for you.
How much can I raise as a mortgage?
How much you’re able to borrow through a mortgage will depend on your income and expenditure.
Your lender will assess your financial situation before deciding on the maximum amount they’re willing to lend you.
When are fees payable and are they refundable?
While some mortgage fees are payable up front, others can sometimes be added to your mortgage loan.
If you add fees to your loan, you’ll pay more over the term of your mortgage, while your lender may not add fees if doing so affects the affordability of your mortgage.
Some mortgage fees are refundable, and others aren’t, so speak to a mortgage advisor or broker who will be able to provide a breakdown of what fees you can expect.
How much deposit do I need?
However, some lenders will accept a 5% deposit in some cases, with first-time buyers also able to use the Help to Buy scheme.
The more you can save as a deposit, the better interest rate you’ll be able to secure for your mortgage.
Do I have to take out protection?
There’s no legal requirement to take out mortgage protection insurance, but many buyers choose to do so to protect their family should they die or become injured and be unable to pay their mortgage.
I have had problems with credit in the past, can I get a mortgage?
The first step to take if you want to take out a mortgage, but have had financial or credit problems, is to speak with an independent financial advisor.
Can I buy at auction with a mortgage?
Buying a property at an auction is usually a much faster process than buying on the open market.
When you buy at auction, you’ll exchange contracts and pay a deposit there and then and then have a further 28 days to complete.
So, as well as needing your deposit funds in place, you should also secure a mortgage agreement in principle (AIP) before attending an auction.
Because auction properties complete in such as short space of time, you should speak to a mortgage advisor for guidance on how quickly your application can be completed.
Do I have to take a survey?
Surveys aren’t a legal requirement when buying a property but having one can provide crucial peace of mind.
Your mortgage lender will undertake their own valuation of the property you’re buying and having a survey yourself is always good practice.
Your mortgage advisor should be able to help with guidance on the types of survey available.
What’s a repayment mortgage?
When you take out a repayment mortgage, your monthly repayments cover both the capital you’ve borrowed and the interest.
At the start of your mortgage term, you’ll pay more in interest than capital, but once your interest amount starts to clear, you’ll then pay down more of the capital in later years.
With a repayment mortgage, you’ll pay down the capital borrowed and interest, meaning your mortgage balance reduces every time you pay.
Early on in your mortgage term, you’ll pay mostly interest but in the later years, your capital amount will start to fall more quickly.
