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What is a Mortgage?
To have an entire down payment for your dream home isn’t a realistic option for most people. That’s when you apply for a mortgage.
When opting for a mortgage, you only put down a certain percentage (usually 10%) of the home’s value as a deposit and the rest, 90%, is funded by your lender. In simple terms, a mortgage is a type of loan designed to help you buy a property.
How does a mortgage work?
A mortgage is a heavy loan you take on your property that pays off on a monthly payment cycle.
At Monefi, our senior mortgage experts workout your monthly repayment amount, keeping it affordable and tailored to your specific situation.
We determine the duration of your mortgage repayment with your monthly budget in mind. This way, we make sure it’s a comfortable fit for you. In short, by breaking down your mortgage into smaller monthly payments over the years, we ease the management of your mortgage, making it more manageable and less overwhelming.
Work out your mortgage with ease*
Let’s do the maths:
If you are buying a £250,000 property, you’ll ideally need a deposit of £25,000 (10% of property value), and the remaining £225,000 would be the mortgage amount.
Monthly payment on a 30 year mortgage term will be £1214, fixed for 5 years at 5.05% *interest rates subject to market fluctuations.
How to get a mortgage?
It takes just 3 simple steps towards your dream home:
Mortgage expert tip:
If your property price increases over time, and your mortgage balance decreases with regular repayments, the loan to value (%) decreases. Lenders will always offer a better interest rate for mortgages that have a lower loan to value, as these are seen as less risky by the lenders.
What are the benefits of having a Mortgage?
Acquiring a property through a mortgage opens the door to your dream home without the need for full upfront savings. A down payment as low as 5% to 10% of the property’s value, combined with a mortgage covering the remaining 90% to 95%, is a feasible option. Specific terms, conditions, and borrowing limits apply to this opportunity. Other notable benefits include –
One of the most important advantages of having a mortgage is the ability to own a home, which offers stability and the opportunity to accumulate equity over time. This can be instrumental in building wealth and accomplishing long-term financial objectives.
When you manage your mortgage responsibly by making on-time payments and fulfilling your obligations, it can positively impact your credit score. This can open up opportunities such as lower interest rates on loans and credit cards in the future.
Consistent Monthly Payments
A fixed-rate mortgage ensures stable, predictable monthly payments for a set period. It’s excellent for budgeting and shields you from unexpected payment changes. However, consider other flexible mortgage options to match your specific needs.
To apply for a mortgage, you'll typically need the following:
Name, address history, dates of birth, and contact information are essential details used in the identity and address verification process. These details help confirm an individual’s identity and ensure the accuracy and security of various transactions and services.
Complete an application provided by the lender, supplying personal and financial information. This step is crucial for the lender to assess your eligibility and determine the terms of your loan or financial service.
Lenders will evaluate your credit history to establish your eligibility and the terms of your loan. This assessment is a key part of the loan application process.
Proof of Income
You’ll need to supply proof of your income and current employment status as part of the application process. This helps the lender assess your ability to repay the loan.
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Frequently Asked Questions.
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Mortgage deposit requirements vary. Typically, 10% is sufficient for traditional purchases, but larger deposits increase approval chances and lower payments. Some specialist purchases offer 100% borrowing without deposits.
A lifetime mortgage, empowers homeowners aged 55 and older to access funds from their home’s equity without monthly repayments. Repayment, including interest, occurs when the homeowner passes away or moves into long-term care, and the property is sold. It’s a financial tool designed to provide flexibility and support in your later years.
A variety of mortgage payment options are available, such as fixed-rate payments, Tracker rate payments, Discount Rate payments and Offset payments. To select the most suitable payment type for your requirements, a mortgage broker can provide you with insights and advice on the advantages and drawbacks of each option.
Loan-to-Value (LTV) is the ratio of a loan amount to the appraised value or purchase price of an asset, like a property. It helps lenders assess risk.
- Higher LTV ratios mean more risk for lenders, potentially leading to higher rates or mortgage insurance.
- Lower LTV ratios are viewed more favourably by lenders and can result in better terms.
A tracker mortgage has an interest rate linked to a financial index, like a central bank’s base rate. As the index changes, the mortgage rate adjusts accordingly. It offers transparency but means your payments can go up or down with market rates. It’s attractive when rates are expected to stay low but carries the risk of rate increases.
Improve your credit score, get on the electoral register, build your deposit, pay your bills, check your eligibility, start planning early.