It is quite likely that a mortgage will be the biggest investment that individuals will make during their lifetime. This financial obligation will last for a very long time; therefore, it is vital that all required mortgage information will be sought before a decision is made. The process of purchasing a new home can be quite daunting and knowing where to start is often difficult. This residential mortgage guide is designed to assist in making the process easier.
In April 2014 the UK went through the biggest change the UK housing sector has seen in decades—The Mortgage Market Review (MMR). This changed the way that mortgages were agreed and provided across the board and has made things even more complicated for the general public in terms of understanding what lenders will and won’t agree to do in a lending capacity.
This type of mortgage is essentially a loan received by one or more individuals to purchase residential property in which they will reside or use as an income property. A lien on the property is used to secure the loan and borrowers have a specified period of time to repay.
With residential mortgages, lenders will decide the amount that can be borrowed based on the income of the borrowers. A standard income multiple is used by some lenders and this is basically the number of times the income you earn that they will allow you to borrow. This coupled with monthly income and expenditure checks (post MMR) dictate the level of borrowing Different lenders use different income multiples and no one is fully aware of the “behind the scenes” background affordability checks that ultimately determine whether or not a loan is deemed affordable.
There are a lot of lenders who are now using the affordability criteria in favour of rigid income multiples. Affordability criteria examine debts and other expenditures when working out the amount that you can borrow, giving lenders a bigger picture of your financial status. For example, two individuals can have the same income but one is bogged down in credit card debts; the debt-free borrower will have access to bigger mortgage since he or she would be better able to repay the loan.
Residential mortgages can be repaid in two main ways. The first is where interest is paid in addition to a part of the capital. The other option is paying only the interest each month, which is an indication that money would still be owed when the mortgage term ends. Therefore, a method to pay off the loan will have to be established to generate the lump sum required. A third available option is combining interest-only and repayment. It is widely regarded as capital repayment is the only way with lenders imposing somewhat extreme conditions on interest only approval – ie a current pension fund in excess of £1million.
There are a number of different types of residential mortgage rates. The primary ones are fixed-rate mortgages, which enable individuals to know precisely what their monthly payments will be; discounted-variable rate mortgages, which describe the rate of interest below a typical variable rate for particular types or mortgages; flexible mortgages, which are the capabilities within certain mortgages to decrease or increase monthly payments, on condition of pre-agreed limits and base-rate tracker mortgages, which are mortgages in which the interest rate follows another interest rate exactly.
The mortgage type chosen will depend on the circumstances of the borrower as well as the attitude and whether he or she believes that interest rates will increase or decrease.
Whether you are re mortgaging, moving home or a first time home buyer, you can get access to the best residential mortgage rates. A knowledgeable independent broker is a great asset to have when seeking out residential mortgages. We offer our clients personalized service and manage their requirements from the very beginning to the end of the process. Additionally, this will make the process stress free and give clients access to the best possible mortgage rates.