I’d like a residential mortgage?
A residential mortgage is a loan used to finance the purchase of a residential property in which the borrower intends to live; it may also be used to pay for improvements to the property.
The key phrase in this definition is ‘in which the borrower intends to live’. If the borrower is not intending to live in the property but is going to let it for rent, then a buy-to-let mortgage will be needed. Renting property is considered to be a commercial activity and commercial mortgages are granted on different criteria, with different terms and, usually, at higher rates of interest.
Buying a property is the largest financial undertaking most of us will ever make: having a mortgage is a massive commitment and one that we’ll probably have for the rest of our working lives. As you may be living with its effects for many years it’s important that you make sure you get it right, right from the get-go, so it’s vital that you get expert advice before making any commitments. A financial adviser who understands the mortgage market will be worth their weight in gold as they’ll find exactly the right mortgage for you out of the many available on the market.
The first thing you’ll need to know is how much you can afford to repay on a monthly basis. As this is difficult to predict, mortgage providers use an ‘affordability calculator’ to work out how much they are prepared to lend you. Quite often the calculation starts using an ‘income multiplier’ to give the provider a starting point and this figure is then adjusted, downwards, as they take into account your monthly outgoings. They have to be cautious; they don’t want to have to repossess your home unless it becomes absolutely necessary.
You’ll also need a deposit of at least 5% of the value of your new home. This figure isn’t set in stone and some lenders expect a minimum of 10%. To put these percentages into perspective: if you want to buy a property that costs £250,000 you’ll need a minimum deposit of at least £12,500 (5%) and possibly £25,000 (10%). But, on a positive note, having a larger deposit means you’ll invariably get a better deal on your mortgage loan.
Once you’ve got your deposit and know how much your mortgage provider will lend you it’s a ‘Very Good Idea’ to get the mortgage ‘agreed in principle’. Doing so effectively ring fences the loan: you’ll know exactly what you’ve got to spend and, more importantly, know that it’s there for you when you come to make an offer on your dream home.
How can One Financial Solutions help you?
One Financial Solutions is here to help you no matter whether you’re a first-time buyer, thinking about ‘buy-to-let’ as an investment opportunity or wanting to know the pros and cons of equity release.
Buying a property is probably the greatest financial undertaking most of us will ever make; it’s a huge commitment and one that needs to be thoroughly considered, ideally with the help of an expert guide. As a truly independent firm of financial advisers we’ll make sure the mortgage we recommend to you is selected from the entire market and is the one that is best for you.
So, if you’re looking for a mortgage or just want advice on an associated subject, please call us on 020 3714 9565 or ask us to call you by sending an email to firstname.lastname@example.org.