Whether you are a first-time buyer, moving home or simply wishing to take advantage of a more competitive rate, it is important that you have the right mortgage solution.
Finding the right mortgage for you and your individual circumstances is paramount.
The products on offer from lenders are always changing. Heritage’s mortgage experts understand the complex property market and have the experience needed to identify trends and navigate any difficulties that could arise, ensuring you get the deal that is right for you.
The type of finance you need to secure your home will depend entirely on your personal circumstances, however our advisers can provide key areas of mortgage advice.
A mortgage is simply a long-term loan secured on a property. The ‘secured’ part means that if you do not make your mortgage payments, the mortgage lender has the right to repossess the property and sell it to repay the money you borrowed.
You have two options; a repayment mortgage or an interest only mortgage.
With a repayment mortgage you repay both the capital and the interest together in fixed instalments over an agreed period of time. Provided you keep up your repayments, your entire mortgage will be repaid at the end of the term.
With an interest-only mortgage, you pay the interest due but none of the amount you have borrowed. While your repayments will be less than an equivalent-sized repayment mortgage, at the end of the term you still owe the original amount that you borrowed. The remaining capital will be repaid under the conditions outlined by the mortgage lender. You should be aware that very few lenders now offer interest-only mortgages.
Generally, you’ll need a minimum of 5% of the purchase price of the property you want to buy. In which case you would take out a 95% mortgage. If you are able to provide a larger deposit, lenders often see this as less of a risk and may offer you a more competitive interest rate.
You will need to decide on which type of interest rate is going to work best for you. Mortgage interest rates fall into two main categories; fixed-rate and variable rate, although there are several variations within each of these categories.
A fixed rate mortgage is set for a particular period of time and the interest you are charged will stay the same throughout the deal.
With a variable rate mortgage, your interest rate can change at any time. This means your payments could rise or fall as interest rates fluctuate.
Whilst buildings and contents insurance may sound straightforward, it is important to remember that the cost of replacing everything that you own could be financially crippling.
It is also important to make sure that you are not under-insured, especially if you own a high value home, as this could mean higher value repairs in the event of damage.
There are several terms used to describe the interest rates you pay on a mortgage, and the key terms are as follows:
Standard Variable Rate (SVR) – The SVR is the lenders standard rate. With a variable rate mortgage you are normally able to switch lenders at any time without being penalised. If you take out a mortgage that has a fixed, tracker or discounted rate once the set period of time ends the loan will usually revert to the Lenders SVR.
Fixed Rate – A fixed rate mortgage allows you to repay interest at a fixed rate, irrespective of any interest rate fluctuations. In other words your monthly repayments will remain the same every month for a time period agreed between you and your lender.
Tracker – A tracker mortgages usually tracks any movement in an index specified by the lender, this for example could be the Bank of England Base Rate for a set period, so you will benefit from any falls in interest rates, but will also have to pay more each month should the rate increase.
Discount – The discount mortgage rate is another variation of the standard variable rate. It provides a discount from the lenders SVR for a set period of time. The variable interest rate still fluctuates, meaning your monthly repayments may differ slightly from month to month, but the discount remains constant.
Fixed, Tracker and Discount rate mortgages often have early repayment charges, so you need to be sure this is suitable for you for the foreseeable future. Furthermore, the lender may also charge a ‘booking/arrangement fee’ to apply for these types of mortgage. You should ask your adviser to explain these in more detail or ask for an illustration.
Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend on your circumstances, but we estimate that it will be £500.