A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
MOST BUY-TO-LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Mortgages are loans which are intended to help buyers purchase residential property. When an individual takes out a loan, the lender charges interest: the same is true of a mortgage.
A mortgage is a ‘secured’ loan, which means that the loan is secured against the value of the property being purchased until the mortgage is paid off. Sources of residential mortgages include high street banks, building societies and other types of less well known financial institutions.
Mortgage providers follow a set of rules and procedures when deciding whether or not they will agree to provide a mortgage to purchase a residential property. Although different lenders apply different lending criteria, the amount a potential buyer can expect to borrow of a property’s purchase price is determined solely by the mortgage provider’s requirements.
Here are some of the factors lenders take into account when making their decision:
The mortgage provider will want to be certain that the borrower can afford to service the loan — i.e. to make the monthly repayments as and when they fall due. To help them make that decision, the lender will want to see the borrower’s personal financial incomings and outgoings. Any rent the borrower may be paying will be discounted, but the lender will factor in the potential cost of the monthly mortgage repayment.
The amount the borrower can contribute towards the cost of buying a property — the ‘deposit’ — is a major consideration. Because most mortgage loans are secured on the value of the property, mortgage providers prefer borrowers who can provide large deposits: the smaller the loan, the lower the lenders’ risk. And the larger the deposit, the lower the borrower’s monthly repayments will be, which reduces his or her outgoings and improves the affordability criteria from the lender’s point of view. In the current financial climate, most lenders expect borrowers to deposit at least 5% of the property’s purchase price.
Mortgage providers lend against the value of the property, not the agreed purchase price. To avoid lending more than is absolutely necessary (and therefore increasing their financial risk) most mortgage providers will insist on having the property in question valued by a qualified surveyor.
Some lenders will not consider mortgaging certain types of properties. Leasehold properties, properties below a certain price, property being purchased through an assisted purchase scheme or under a Right to Buy scheme, or where property is being purchased ‘off plan’, may not be acceptable to the mortgage provider.
Mortgage providers generally have a maximum number of years over which they lend and will set a date when the mortgage must be repaid in full.
Read lessCompany address: Morley Fordham, 83 Ellerton Road, Wandsworth, London, SW18 3NH
T: 0208 877 3443 F: 0208 265 1442 E: derek@morleyfordham.com
Privacy Notice Best Execution Policy Client Classification Conflicts Of Interest Policy Your Guide To Making A Complaint
Personal Client Agreement
Morley Fordham is an appointed representative of 2plan Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority. Morley Fordham is entered on the FCA register (www.FCA.org.uk) under no. 165322.
Registered office: 83 Ellerton Road, Wandsworth, London, SW18 3NH.
Registered in England & Wales: 165322.
The guidance provided within the website is subject to the UK regulatory regime and is, therefore, primarily targeted at consumers based in the UK. This site does not confer any form of personalised financial advice, should you wish to receive specific financial advice please contact us.
Copyright © 2014 Adviser Pro All Rights Reserved.