Residential

Frequently Asked Questions

What is a Residential mortgage?

A residential mortgage is a financial agreement between a lender and a borrower to purchase a property. The lender agrees to loan the borrower an agreed amount of money, plus interest, so that they can purchase a property to live in. The borrower repays the loaned amount over a specified time, generally 25 years (but this can be a lot less or extended up to 30+ years). The amount you can borrow is worked out on affordability and meeting lender criteria.

What can a Residential mortgage be used for?

It can be used to purchase a property for you to live in. If you are buying a property to rent out you would need a Buy to Let mortgage. If you are buying a Commercial property, again, you would need a different type of mortgage.

How does a Residential mortgage work?

Usually, you are able to borrow up to 4.5 times your income (or combined income if it is a joint mortgage). You will need a deposit, the more you have the less you will have to borrow. The minimum is usually 5%. However, a 10% plus deposit will give you a bigger choice of lenders. You may already have a property and are selling it to move home. If there is profit (equity) in this property, this could be enough to be the deposit for your next home. The lender will look at things like your Age, Residential Status, Income, Affordability, Credit History, Deposit size and Property Type. Providing these meet the lenders criteria, an agreement will then be made between you and the lender which states how much you have to pay and for how long. Your home may be repossessed if you do not make the repayments.

Can I get a Residential Mortgage with another person?

Yes, this is called a joint mortgage.

Are there different types of Residential mortgages?

Yes, there are different types of Mortgages. They include:

Repayment mortgages: where the borrower pays the whole mortgage (capital plus interest) over a set period of time.

Interest only: where the interest is the only part of the loan being repaid, you would have to make provision to pay off the capital by the end of the mortgage.

Fixed rate: where the sum repaid is at a fixed interest rate for a period of time, usually between 2 and 5 years. This can be useful to manage your money. After that the interest reverts to the lenders standard variable rate for the rest of the mortgage unless you complete a new mortgage deal.

Variable rate: where the monthly interest base rate is set by the lender and adjusted monthly or annually meaning it could go up or down.

Tracker rate: where the interest rate tracks the Bank of England`s base rate meaning it could go up or down.

Discounted rate: this is a form of variable mortgage, where the interest rate is set just below the lenders standard variable rate, for a set period of time.

These can be in combination with one another for example an interest only, fixed rate mortgage. Lenders can charge early repayment charges, this is applicable when you repay some or all the mortgage off within the mortgage term. This can vary and will be part of your mortgage offer.

How much does a Residential mortgage cost?

Typically, the costs include:

Broker Fee

Product fee, charged by the lender (some do not charge)

Deposit

Valuation Fee, these can vary

Solicitors/Conveyancers Fees, these can vary

Insurance, you must insure a mortgaged property, these can vary

Monthly payments, ongoing. (See ‘Do I pay monthly?’ below)

Do I need a deposit?

Usually a deposit is required. The minimum is usually 5%, However, 10% plus will give you a bigger choice of lenders and usually a lower interest rate. This could be from the sale of your current property.

Do I pay monthly?

Yes, the amount you pay is based on the amount borrowed, interest rate, type of mortgage and term.

Is there any help available?

Yes, there are government lead and developer/lender led schemes to help people. For example, first time buyers may be eligible for exclusive deals.

Shared ownership is also available, providing you meet the criteria. This is where you buy a share of a home from the landlord, this is usually the council or a housing association, and pay rent on the remaining share. You would have a mortgage to pay for your share, which can be between 25-75% the full value. You then pay a reduced rent on the share you don’t own. Later, you can choose to buy a bigger share in the property, and ‘staircase’ up to 100% of its value.

What is a Remortgage?

A Remortgage is when you move your mortgage on your existing property, from one lender to another. Your new mortgage replaces your old one.

You may want to remortgage if you are: coming to the end of your existing mortgage rate, looking for a better deal or are wanting to borrow more money against your property (Capital Raising).

You need to be aware you may be charged an early redemption charge and fees such as a new valuation, as well as solicitors fees.

Can I get extra funds when I Remortgage?

Yes you can. This is called Capital Raising. Providing you have enough equity in your property and you meet the lenders criteria, you can remortgage your property to release funds for other purposes. For example home improvements, a car, a holiday, a wedding or to consolidate existing debts.

Do I need an EPC (Energy Performance Certificate) rating for current property?

If you are selling a property you must produce an EPC.

Use this link to the government website to check if you have one, or to get one, costs apply.

https://www.gov.uk/get-new-energy-certificate

If you are buying, the home owner you are buying from, has to make the EPC details available, usually through the Estate Agent. It is useful to know the rating as some lenders offer better rates for properties rated A-C.

Can I get a mortgage if I have adverse credit?

Adverse credit, also known as bad credit, does not necessarily mean you are unable to get a mortgage. Every situation is unique and we can advise accordingly.

How can I check my credit report?

Use this link for Check My File Credit Report

https://www.checkmyfile.partners/694W2WN/2CTPL/

Check my file offers a 30-day free trial which is £14.99 per month, thereafter, and can be cancelled at any time.

What should I do next?

When you are ready, please give us a call. One of our friendly advisers will gather information about your enquiry and offer advice accordingly. We offer FREE initial consultations.

Case Study Example

Mr and Mrs X have a combined income of £55,000.

They choose a house priced at £250,000. They have a deposit of £25,000 (10%).

After advice, they choose a Repayment Mortgage over 30 years, and a 5 year fixed deal at 4.8%. This deal had no arrangement fee and a valuation fee of £100.

Their monthly payments are £1179.48.

After 5 years the mortgage will revert to the Lenders Standard variable rate, currently 8.74%, which would mean the payment would then be £1686.90 per month. They could, however, remortgage to a new deal.

This example is based on figures from a high street lender on 14/03/2024 and is for illustrative purposes only.

Your property may be repossessed if you do not keep up repayments in line with the lenders schedule. Think carefully before securing debt against any property.