What is a mortgage?
In simple terms, a mortgage is a loan that is secured against a property. By being secured against the property, it means the lender can repossess the property if you do not keep up repayments on the loan. This loan is usually provided by a bank or building society.
A mortgage typically requires a cash deposit, this amount can vary depending on the size of the loan, your mortgage terms and repayments and what funds you have available to pay up front.
A mortgage is then paid back in an agreed monthly amount over a set amount of years.
Do I need a mortgage?
If you do not have the money in full to buy a house yourself and you need to borrow some or all of the funds, then you would consider taking out a mortgage.
What types of mortgages are there?
There are many different types of mortgage that cater for all kinds of circumstances. These include:
- Interest only mortgages
- Capital and interest repayment mortgages
- Fixed-rate mortgages
- Tracker mortgages
- Discount mortgages
- Offset mortgages
- Help to Buy mortgages
- Right to Buy
- Buy to let mortgages
- Second mortgages
- Lifetime and equity release mortgages
- Guarantor mortgages
- Bad credit mortgages
- Bridging loans
- Self employed mortgages
- Commercial mortgages
- Mortgages for older borrowers
- Retirement Interest Only mortgages (RIO)
Where can I get a mortgage?
Mortgages are traditionally offered by Banks and Building Societies, but there are also many other specialist mortgage lenders that are available.
You can apply directly to a mortgage lender or use a Mortgage Broker to help you through this process.
What is a mortgage broker?
A mortgage broker - sometimes known as a mortgage advisor - is a qualified finance professional who can recommend the right mortgage deal for you and will also assist with the mortgage application process.
Some mortgage brokers only work with a small panel of lenders while others, like ourselves at Go 2 Mortgages, work with the whole of the mortgage market and have access to many more products.
A mortgage broker:
- Is regulated by the Financial Conduct Authority (FCA)
- Works to strict rules and follows set legal guidelines
- Aims to ensure that you are getting the best advice in relation to your needs.
Some mortgage brokers will charge a fee for their services while others, such as ourselves at Go 2 Mortgages, will not.
Mortgage brokers will also be paid by the mortgage lenders for introducing business to them - this payment is called a procuration fee (often known as a proc fee).
A broker is not allowed to be influenced by the amount of this fee when deciding which product to recommend to you.
How does a mortgage work?
Applying for a mortgage
The first part of the mortgage process is the “Fact Find”. This is where we collate all the information we need about you, your circumstances and what you are looking to achieve from the mortgage.
This information is made up of both “hard facts” such as name, address and income information and “soft facts” such as how you feel about different aspects of the mortgage itself and your preferences. Our team of experts will guide you through this process with ease.
Once we have all this information, we can start the process of finding the perfect mortgage for you and look to get an agreement in principle in place.
How to get a mortgage in principal
A mortgage in principle (MIP), also referred to as an Agreement in Principle (AIP) is a certificate that we provide for you to show estate agents and vendors of properties that you could be eligible to get a mortgage for.
It is essentially the first part of a mortgage application that will check that you can afford the mortgage and that you meet the lender's criteria.
Most of the time, it will involve a “soft” credit search which will not have an affect on your credit report.
Submit Mortgage Application
The formal mortgage application will be submitted when you are ready to go ahead with the process. If you are buying a new property, this will be when you have agreed on the purchase price. If you are remortgaging, this will happen straight away.
Your dedicated mortgage specialist will work with you to:
- Finalise the figures;
- Agree on the specific mortgage you want to apply for;
- Make sure all the paperwork required is in place.
Our team will then submit the application to the lender on your behalf.
Once they have received everything, the mortgage lender will then start processing your application. This process is called underwriting and involves the lender checking all the application information and documentation to make sure that they are happy to agree the mortgage.
They will also conduct a valuation of the property at this stage. This valuation may involve a surveyor visiting the property or it may take place “virtually” using an online valuation.
If any queries are raised by the lender, your dedicated specialists will aim to resolve these as quickly and smoothly as possible.
They may need to contact you at this stage if the lender has requested further information. Once the lender is happy to accept the application, they will issue the Mortgage Offer.
What happens once a mortgage offer has been issued?
Once your Mortgage Offer has been issued, the legal work will be all that is outstanding - this is called conveyancing.
Your solicitor will take care of this and keep you informed of the progress.
How long does the mortgage process take?
We aim to have a mortgage offer issued within 3 weeks of your application being submitted. There can occasionally be issues beyond our control, such as lender or surveyor delays, but we will keep you informed every step of the way.
The conveyancing can take more time however. If you are buying a property, there are many different aspects that can affect the timescale, but we typically say that it takes around 12 to 16 weeks from start to finish.
What costs are involved in getting a mortgage?
As you would expect, there are a few costs that are involved in purchasing a property.
In terms of the mortgage, you may need to pay for a valuation by the lender, although some lenders offer this for free. There may also be arrangement fees charged by the lender.
Many lenders offer a range of mortgages with and without arrangement fees, with differing interest rates for each. Your advisor will discuss these with you and explain the best way for you to proceed and why.
If you do choose a mortgage with an arrangement fee, we can often add this to the loan, reducing the upfront costs you need to pay.
Although the lender will require a valuation report on the property, you may decide that you would like a more detailed survey for your own peace of mind. We can help arrange this for you should you want one.
You may also need to pay:
- Your solicitors for both their work and some costs that will be incurred by them. These can be things like: local authority searches (disbursements), legal costs at the start of the process (around £250-£300)
- Stamp Duty, depending on your circumstances and the property you are buying. This is a tax levied by the government on property purchases. You can find out how much you will need to pay by using the government’s Stamp Duty Land Tax Calculator.
All in all, we would expect the upfront costs of buying a property to be in the region of £1,500 to £2,500 plus any Stamp Duty that is due.
What costs are involved in remortgaging?
If you are remortgaging, the costs are considerably less. This is because the lender will often pay for the valuation of your property and the legal work involved in the remortgage.
There may be lenders arrangement fees, but these are usually added into the mortgage amount.
For a remortgage, with no changes to the ownership of the property, there will be no Stamp Duty payable.
Most remortgages we deal with do not require any upfront payments from our clients.
How much interest will I pay?
The interest you will pay depends on many factors, such as:
- What loan to value you are looking to borrow
- What type of mortgage deal you are looking for (such as fixed rates or tracker rates)
- Your personal circumstances
- The type of property the mortgage will be on
...and many more.
It is also important to remember that the interest rate is only part of the total cost of a mortgage; lenders arrangement fees, valuation costs and incentives offered by lenders should also be taken into consideration in the choice of the right mortgage for you.
Either way, your mortgage specialist will work with you to ensure that your new mortgage is the perfect fit for you.
How do I know how much I can borrow for a mortgage?
The amount you can borrow on a mortgage depends on many factors, including:
- Your income and outgoings (these are the main factors);
- Number of dependents you have;
- How long you take the mortgage over;
- What loan to value you are looking for.
Different mortgage lenders also have different ways of calculating affordability, meaning that how much you can borrow will differ between lenders.
Try our affordability calculator to get an idea of how much you may be able to borrow.
Is your mortgage service always free?
Our service to find you a mortgage and complete your application is free - we are paid by the mortgage lender for sending your application to them.
If we are unable to place your mortgage due to a problem with your credit history, we may ask your permission to refer you to our sister company who specialise in this area.
They may charge a fee for their service, but this will be fully explained and agreed with you prior to them commencing any chargeable work on your behalf.
What do I need for a mortgage?
There are a few pieces of documentation that you will need to provide to apply for a mortgage. These will usually include:
- Proof of ID
- Proof of address
- Proof of income
- Bank statements
- Details of outgoings
- Proof of deposit if purchasing a property
There may be other things that a lender will ask for. Your dedicated mortgage specialist will work with you to make sure you know exactly what documentation is required.
Do I have to have a solicitor?
Whenever you are applying for a new mortgage, you will need to have a solicitor do take care of the legal work involved.
If you are buying a new property, the solicitor will work for you and also for the mortgage lender to make sure that there are no issues, such as boundary disputes or planning problems.
They will conduct searches with the local authority and other bodies to make sure everything is in order. You will normally be expected to pay for the solicitors fees and costs when you buy a new property.
If you remortgaging, the solicitor will work solely for the new lender and will make sure that the property the mortgage is secured against, is suitable.
On a remortgage, the solicitors costs are usually covered by the mortgage lender. In both cases, the solicitor is also responsible for paying the money provided by your lender to either the seller's solicitors or your existing mortgage company in the case of a remortgage.
The only time you will not need a solicitor is if you are switching mortgage products with your existing lender, known as a product transfer.
We can help you find a solicitor if you need us to, or ask your advisor or case manager.
Do I have to have Life Insurance?
The simple answer to this is no, there is no legal requirement for you to have life insurance in place. Of course, it is something you should seriously consider depending on your circumstances.
We will talk to you about this and if you want to look into it, we can refer you to our sister company who are specialists in this area and can advise the best course of action for you to take.
Do I have to have Buildings and Contents Insurance?
When you take out a mortgage, the lender will insist that you have suitable buildings insurance in place for the property, and the solicitor should ask for you to provide evidence of this before the mortgage completes.
This is to ensure that, should something happen to the property and it is severely damaged, the lenders’ security for the mortgage is protected.
Contents insurance however, is not mandatory when you take out a mortgage as this protects your items within the property, rather than the property itself. Of course, it is something we recommend you look into and ensure you have the right cover in place to protect your hard-earned belongings.
We will speak to you about this as part of our process and can refer you to an insurance specialist who can advise you on the right policy for your circumstances, should you require us to.