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Most Popular Reasons for Taking Out a Mortgage
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BBC Mortgage FAQ’s
A mortgage1 is a loan taken out to buy property or land.
Most run for 25 years but the term can be shorter or longer.
The loan is ‘secured’ against the value of your home until it’s paid off.
If you can’t keep up your repayments the lender can repossess (take back) your home and sell it so they get their money back.
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Borrow against the value of your home or sell all or part of it for a regular income, a lump sum, or the facility to get at equity as and when you like or a combination of these options.
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Although there are many different mortgages available for homes, they can all be split into these main categories.
Over the period or term of your mortgage, every month, year after year you steadily pay back the money you’ve borrowed, along with interest.2
Over the term of your mortgage,3 you only pay off the interest. You you don’t actually pay off any of the mortgage. The monthly payments will be lower, but won’t reduce the capital you owe.
Fixed Rate Mortgage
With a fixed rate mortgage, your lender guarantees your interest rate will stay the same ‘fixed’4 for a set amount of time. Normally this guarantee is capped between 1–10 years.
Standard Variable Rate (SVR) Mortgage
SVR is a lender’s default. No deals, bells or whistles are included. Each provider is free to set their own SVR, and adjust it when they like.
Discounted Rate Mortgage
You get a discount on the lender’s SVR over a set period of time. This is a type of variable rate, so the amount you pay each month can change if the lender changes their SVR, which they’re free to do as they like.
They are a type of variable rate mortgages, which means you will probably pay a different amount to your lender each month. Tracker rates follow a particular interest rate to determine what you pay each month, then adding a fixed amount on top of that base rate.
Capped Rate Mortgage
These are variable mortgages, with a limit or ‘cap’ on how high the interest rate can rise. Often, the interest rate is higher than a tracker mortgage – so you might end up paying extra for that peace of mind.
When you sign up to your mortgage, the lender pays you a lump sum5 of cash (usually, a percentage of your loan).
These allow you to overpay and underpay and even take a payment holiday (skip a few monthly payments) if required.
This is a way to use your savings to reduce the amount of interest you pay on your mortgage. You need to turn your mortgage into an offset mortgage, open a current or savings account with your mortgage lender and link that account and your mortgage up.
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With a BBC mortgage, you need to use the money to raise funds to buy real estate, or alternatively if you’re an existing property owner you can raise funds for any purpose, while putting a lien on the property being mortgaged.
Note that mortgage plans are not right for everyone and it’s important that you fully consider your options and receive independent financial advice before making a decision. It’s also important that, if you do decide to use a product, you choose one that meets your needs.
Remember that taking a mortgage is generally a long term option. However, there are many plans available that may fit your varying needs.
A financial adviser can help you to choose the plan that is right for you.
Use Some of Your Home's Value to Live Life Your Way
Working out how much you can borrow from a mortgage lender is not straight forward. It’s no longer a case of simply multiplying your salary by a certain amount to arrive at the ‘magic number’.
However, here’s a list of eight things that impact how much you can budget to borrow.
- Credit Cards – If you use a credit card, it’s always best to pay it off in full each month
- Personal Loans & Hire Purchase – The monthly payment you make will be subtracted from your income, in turn reducing the level of disposable income from which to make a mortgage payment.
- Pension Payments – there’s no standard approach from mortgage lenders when looking at these payments. Some will view the payment in the same way as a loan – they will reduce the monthly income.
- Children – the more people reliant on the income, the more this can reduce the maximum loan available.
- Credit Score – mortgage providers will gather data from the credit reference agencies & this will impact the amount you can borrow.
- Term – the longer the term the more you can borrow.
- Deposit – the more deposit or equity you have, the more you can borrow or the more favourable the interest rate you can get.
- Income – the more you earn the more you can borrow. However, not all income is treated equally. Payments from bonus, commission, overtime, shift allowance, self-employment are all looked at differently to basic salary.
There are a few variables but the biggest are the term, deposit and income. Find out how much you can afford to borrow using the FREE mortgage calculator and it will help you search for the best deal.
Things change. If you’ve already released equity from your home in the past, you can often save a massive amount by getting a lower interest rate.
Get a quote and find out if you qualify for a lower interest rate. See how much you can afford and save your budget now.
The average deposit number for first-time buyers in the UK is £25,588, according to data from the Council of Mortgage Lenders.
The number of first-time buyers in London are looking at an average deposit of around £93,184, three times the national average. Whereas, in Wales and Northern Ireland, first-time buyers need to find deposits of less than £15,000 to fund their homes.
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