If you're thinking about taking a mortgage for purchasing a home then this article will show you:
- What a mortgage is, how it relates to property and what happens if you don't keep up with your payments.
- Mortgage calculators, revising your income and mortgage advisers.
- Bank, building society or mortgage broker.
- The Financial Ombudsman redress scheme.
- Reputable companies and today's mortgage market.
- What Is A Mortgage?
- How Do I Know If I Can Afford A Mortgage?
- Where Can I Get A Mortgage?
- How Can I Secure The Best Deal For Me?
What Is A Mortgage?
A mortgage in the UK is simply defined as:
A monetary loan for purchasing property or land to inhabit. The loan is held against your house or land until it can be paid off.
The specifics are a lot more in-depth, including repayment plans and how to compare mortgage rates. We will cover this at full in the article and hope you can secure the best deal for you.
Mortgages can be risky depending on what repayment plan you choose to take and your income. Remember to think about your finances smartly and know what you can afford.
If you can't afford to keep up with the payments your home WILL be repossessed (we can stop house repossessions) by the lender.
How Do I Know If I Can Afford A Mortgage?
There are tools online that you can use to work out if you can afford a mortgage, such as the Emerald Finance Mortgage Calculator. On this mortgage calculator you have the following options to help you find out what you can afford:
- Loan Amount - the amount outstanding on your mortgage or the amount of money you wish to borrow.
- Term (years) - the length of your mortgage.
- Interest Rate - the rate of interest you are currently paying on your mortgage.
- Repay Method - the method you have chosen to repay the capital of mortgage.
- Interest Calculator - the period interest is calculated over on your mortgage.
After you've entered the figures into the relevant boxes you will get your results which get updated in real time.
Revising Your Income And Term Length
It is uttermost important that you know what you can afford, as said before, if you can't keep up with repayments your home will be repossessed. Make a realistic target for you and/or partner, and plan ahead as getting a mortgage is a long term commitment.
When talking about mortgage term lengths, most people assume the industry standard is 25 years, but in reality you can choose a different term that suits you and your expenditure (assuming the mortgage lender agrees).
Shorter term plans will have higher monthly payments, but overall you will pay less in the end. Longer term plans will mean you pay less per month, but overall pay more on interest.
Try to avoid plans that will carry over into your retirement.
If you would like expert advice, we would suggest talking to a mortgage adviser on the subject.
Where Can I Get A Mortgage?
You can obtain a mortgage from a bank or a building society, these companies will have a set of their own mortgage offers that you can choose from.
We would also suggest talking to a mortgage broker or a independent financial adviser (also known as IFA), they will find you a range of different mortgage offers from across the market and different vendors. Some even have access to offers that are not made public. Just find out what they intend to charge (if anything) before you go ahead.
It's suggested before taking the first mortgage offer you see, you compare the market. There are hundreds of comparison websites online, the best two websites we found for functionality are:
The Financial Ombudsman Service protects the general public, if you're unhappy about the advice you receive, you can make a complaint.
The Financial Ombudsman was set up by the Government to fix individual complaints that customers and businesses can't solve themselves, the service they provide is free and efficient.
Other financial problems that can be looked at by using their service include:
- Credit Cards and Store Cards
- Loans and Credit
- Payday Lending and Debt Collecting
- Savings and Investments
- Hire Purchase and Pawnbroking
- Money Transfer
- Financial Advice
- Stocks, Shares, Unit Trusts and Bonds
How Can I Secure The Best Deal For Me?
To secure the best deal you should use the tools mentioned before and think long and hard about what you can realistically afford. Keep the future in mind!
There are many mortgage brokers, such as Emerald Finance across the United Kingdom. Finding advice won't be hard! We strongly suggest always taking advice before committing to any mortgage deal.
So, with all that in your mind, we hope this guide was helpful in helping you understand, what a mortgage is and how they work.
N.B. - the information here is general and not intended to replace financial advice.