Introduction to mortgages
Whether you’ve found your forever home, need a few home improvements, your fixed rate is up, or you fancy dipping your toe into the rental market, Woodward’s are able to help you find the solution that’s most suitable for you.
Mortgages are loans which are intended to help buyers purchase residential property. When you take out a loan, the lender charges interest: the same is true of a mortgage.
A mortgage is a ‘secured’ loan, which means that the loan is secured against the property being purchased until the mortgage is paid off. Sources of residential mortgages include high street banks, building societies and other types of less well known financial institutions.
Think carefully before securing your debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Looking for a new mortgage?
First home
The prospect of buying your first home could be both daunting and confusing. Our aim is to guide you through the process from start to finish so that you understand exactly what the purchase entails and how much it will cost.
Remortgage
Remortgaging can improve your financial health in many ways. Whether you’re looking to release funds for home improvements or achieve better monthly repayments, we can help. A remortgage involves moving your current mortgage to a new arrangement either with your existing lender or with a new one.
Moving home
You have a range of options available to you when you move home. Let us help you decide the best route, whether it be porting your mortgage to your new forever home or repaying your mortgage and taking out a new deal.
Buy to let
Thinking of letting your property? Buy-to-let (BTL) mortgages are specifically for individuals who wish to buy residential property which they intend renting to tenants. Although a BTL mortgage is similar in a number of respects to a standard residential mortgage, there are some significant differences between the two.
Some Buy to Lets are not regulated by the Financial Conduct Authority.
See how much you could borrow
Interest rates are on the rise after being at an all-time low for many years. You need to ask yourself if you can afford your mortgage payments if interest rates rise and whether you can repay the capital if house prices fall.
Let’s say you manage to find a mortgage with an interest rate of three percent, fixed for three years. That’s a great rate. After three years you find interest rates have gone up and the best deal you can now get is six percent. That’s an increase of three percentage points but, more frighteningly, your interest rate has increased by 100%. Will your net take home pay have increased at the same rate?
You should budget on the assumption that interest rates will rise during the term of your loan. So be sure you can afford your mortgage repayments when that happens, not just now.
You could buy your new home with just a 5% deposit
Not many lenders are happy to take all the risk of buying your new home, and so do not lend 100% of the value of the property. If you are unable, in the future, to pay your mortgage, the lender needs reassurance that it can take your home and cover the loan by selling it. Less risk taking means lower loan-to-value (LTV) ratios, and personal deposits need to be larger than in the recent past.
You will typically need at least 5% as a first time buyer and commonly up to 20% to access the most competitive interest rates on the market.
The source of the deposit may come from your current property, savings, inheritance or a gift.
Be aware that deposit loans from family and friends can still not be accepted as a source of deposit by some lenders, or can influence how much they may lend you.
Types of mortgage available
We offer access to a wide range of mortgages depending on your circumstances. There is no one size fits all approach to mortgage advice.
Fixed Rate
The interest rate is fixed for a pre-determined period of time, and the monthly mortgage payment will not change during this time.
Tracker
The rate of interest the borrower pays is linked to a specified index, normally the Bank of England’s (BoE) base rate of interest.
SVR
Repayments are based on the prevailing rates of interest their lender charges. It is entirely the lender’s decision on the rate of interest they charge the borrower.
Offset
In return for not receiving any interest on their savings, the homeowner pays a lower rate of interest on their mortgage: an arrangement known as ‘offsetting’.
Self Build
For those who want to build their own home, a conventional residential mortgage is not an option. Instead, the self-builder would need to apply for a self-build mortgage.
Cashback
A cashback mortgage is an arrangement where the lender pays or rebates to the borrower a sum of money either on completion of the mortgage or at a later stage.
What will it cost me?
Before a lender will grant you a mortgage it will insist on a valuation to prove the property is worth what you’re paying for it. The size of the valuation fee will vary by lender and property value.
The basic mortgage valuation is for the lender’s benefit so that it feels comfortable lending against the property. You may feel you want to add a survey to the valuation that gives you a report on the general condition of the property.
If you are buying an older property, or one in a general state of disrepair, you may choose a full structural survey. This is a thorough survey that examines the structural condition of the property and gives you advice on repairs. Depending on the property expect to pay between £500 and £1,000.
Obtaining comparable examples in the same area and for similar property will help you obtain a benchmark.
