I need a mortgage where do I start

They say it's the biggest financial commitment you will ever make in your life - and few can argue with that statement. A mortgage does have to be carefully thought about before entering into any type of agreement.

If you need a mortgage then you are either thinking of become a first time buyer or you own a property already and are thinking of re-mortgaging.

First and foremost it is always worthwhile speaking to a qualified mortgage advisor when looking to re-mortgage or getting a mortgage as a first time buyer.

First Time Buyer Mortgage or Purchase Mortgage

This type of mortgage is used to buy a property. Generally when people purchase a property they will have some form of deposit so then they don't need to borrow the full value of the property to purchase it. However some mortgage companies will allow you to borrow the full value - and some will even let you borrow more. This can be incredibly helpful if you need extra money to furnish your new property.

With all mortgages - the provider will make sure they are happy that you can afford to pay for the mortgage. This is normally calculated by multiplying your salary by a figure that the mortgage company is happy with. This is normally 4 times an individuals salary or 2 ½ times a couples salary. However all mortgage providers do vary slightly so it is worth shopping around. This then creates a maximum amount that the lender feels you could afford to borrow. You then need to work out yourself if that amount is enough to purchase the property that you want to. Check various Banks and Building Societies to see what mortgages they have on offer. The internet is also a superb source of information to see what is available.

Re-Mortgaging

There can be many reasons why you want to re-mortgage. One of the most popular reasons is that you are looking to raise additional money either for home improvements or to consolidate existing secured loans, unsecured loans or credit cards. Re-Mortgaging with your existing mortgage provider is usually the easiest option but it is not always the cheapest. It is always worth shopping around at various Banks and Building Societies to see what is available. The internet is also a superb source of information to see what is available.

Credit Rating

When looking at mortgages it is important to look at how good you believe your credit rating to be. If you believe you have a good to excellent credit rating then you can probably have the pick of any mortgage lender you want - and can therefore compare everything comparably. If you have a poor to very bad credit rating then you may have to look at specialist mortgage lenders that are often found on the internet. You will pay more because of a bad credit rating but a mortgage that is kept up to date could be the first step towards an improved credit rating.

Fixed Rate? Variable Rate? Tracker? Interest Only? Repayment?

These are terms to describe types of mortgages… and there are many more! A fixed rate means your payments will stay the same for a predetermined period even if the Bank of England Base Rate changes – the rate you will get on this type of mortgage is normally slightly higher than a variable rate mortgage. Variable rate mortgages do as they say, the rate is variable and could (and probably will) change if the Bank of England Base Rate changes. This can be beneficial if you believe that interest rates will fall but detrimental if you believe they will rise. A tracker mortgage is where your rate will always be a certain amount above that of the Bank of England Base Rate. An interest only mortgage will mean that you only pay the interest of the mortgage – therefore at the end of your mortgage you will still have the amount you borrowed to pay off. The reason people take this type of mortgage is often to reduce the cost initially when starting on the property ladder. A repayment mortgage means that you pay part of the capital of the mortgage with each payment and part of the interest. With a repayment mortgage at the end of the term the mortgage will be paid off.

Fees

Some mortgage providers say they are "fee free" but always check the small print. There are many fees involved when looking at mortgages so make sure you find out what they are and how they compare to other offers you have seen. Fees can normally be paid upfront or added to the mortgage balance that you are borrowing - depending on what works best for you. There can be valuation fees, set up fees, higher lending fees (if you are borrowing close to the valuation of your property) - so always investigate and find out the total fees you will be paying.

Above everything mentioned above - get advice from a Bank or Building Society or Independent Financial Advisor. Mortgages are complicated. They shouldn't be entered into lightly and don't rush into any decision

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Written by Derek Hosewood of Homeowner Loans of Loan Machine.

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