What is...a mortgage?
If you are looking to get onto the property ladder for the first time here at Willow Tree Financial Services we would love to help!
Firstly, a brief description of what a mortgage actually is.
A mortgage is simply a loan taken out to buy property or land.
Mortgages run for a set term with monthly payments needed to pay it off, if these payments are not made then it can be repossessed. The loan is secured against the value of your property.
Mortgages often have a 2 step approach.
The first stage is the initial enquiry – the broker will carry out fact find to help you work out how much you can afford, and which type of mortgage(s) you might need. This is generally used to provide an indication of how much a lender might be prepared to lend you. They should also give you key information about the product, their service and any fees or charges if applicable. At this point it is usual to obtain an Agreement in Principle. From here you can go and look at property, knowing what you can afford to buy.
The second stage is the full application. The lender carries out a detailed affordability assessment, for which you’ll need to provide evidence of your income and specific expenditure. The lender will also carry out a valuation to make sure it is suitable for them to lend on.
When applying for a mortgage a fundamental thing to consider is how much you can afford to pay monthly, including all the associated insurances such as Buildings, life cover and income protection.
How much deposit do you need?
When buying a property, you will need to pay a deposit.
This is a chunk of money that goes towards the cost of the property you’re buying.
The more deposit you have, the lower your interest rate could be.
When talking about mortgages, you might hear people mentioning “Loan to Value” or LTV.
This might sound complicated, but it’s simply the amount of your home you own outright, compared to the amount that is secured against a mortgage.
For example, with a £20,000 deposit on a £200,000 property, the deposit is 10% of the price of the property, and the LTV is the remaining 90%.
The mortgage is secured against this 90% portion.
The lower the LTV, the lower your interest rate is likely to be. This is because the lender takes less risk with a smaller loan. The cheapest rates are typically available for people with a 40% deposit.
Whether you are a first-time buyer, or a homeowner looking to buy another property or remortgage, Willow Tree Financial Services is here to help!
With our friendly staff we ensure we provided a stress-free service with your best interests in mind. If you would like to learn more or progress with an application, please contact us on 01323 436680.