Frequently asked types of mortgage questions
There are many different things to consider to make sure you have the right type of mortgage you need.
How are you going to pay back the mortgage?
A repayment mortgage is the most common type of mortgage available. With this type of mortgage each monthly mortgage payment you make has an element of capital and interest. Once you have paid back all of the mortgage debt and interest, you will own 100% of your property.
With an interest-only mortgage, you only pay the interest on your mortgage, none of the capital is repaid. At the end of the mortgage term you’ll still owe the original amount you borrowed. With this type of mortgage, you are expected to have a plan to repay your mortgage, some people may have access to investments, large savings accounts, or a secondary property. Lenders have specific lending criteria for interest only mortgages, therefore, not everyone can access this type of repayment.
With this type of mortgage, the lending is split into a mixture of both repayment and interest only mortgage elements.
The lenders criteria for this is normally the same as for interest only borrowing.
An offset mortgage is a mortgage with a savings/current account that’s linked to the mortgage account. This savings account is sometimes referred to as “offset account”.
Why would you want a savings account linked to your mortgage?
- Make lower monthly payments with a payment reduction offset
- Make the same monthly payments that you would on a normal mortgage, so that you essentially make overpayments on your mortgage and pay it off quicker, with a term reduction offset
Offset mortgages are particularly useful if you have significant amounts in savings – or are expecting to acquire some in the near future – and you require a mortgage. They’re also effective if you wish to overpay on your monthly payments but would like access to those overpayments at any time. Offset mortgages are available for purchases or remortgages.
Getting a mortgage when you’re you’re a freelancer or a contractor may have some additional lenders criteria such as proving your income history over a longer period of years than if you’re employed. You may need to provide evidence of the period of time you have remaining on your contract.
To prove your income as a contractor, you’ll need to provide the lender with:
- Usually at least 12 months’ contract/employment history
- Evidence of a current or imminent contract
There are lenders that will still consider your application if you’ve only been contracting for less than one year but can provide evidence of regular work in the same industry or role.
A second charge mortgage, also referred to as a “secured loan” or “second mortgage” allows a person to borrow money on a property which already has an existing mortgage on it. This existing mortgage is called a first charge. The second mortgage is separate from the first mortgage because it’s a completely different product with a new mortgage lender. The rate, period of time and overall mortgage term may be different.
You need your existing lender’s permission in order to secure a second charge on your property.
You might find a second charge suitable if you:
- Want to avoid remortgaging because you’re still on your introductory deal and your mortgage has ERCs (early repayment charges)
- Have a great deal on your current mortgage that you don’t want to lose by remortgaging
- Don’t want to extend the term of your current mortgage
- Aren’t able to get a further advance from your existing lender
- Have found that your credit rating has gone down since taking out your first mortgage
- Are struggling to obtain some form of unsecured borrowing
Frequently asked types of interest rate questions
What are mortgage types such as fixed rates, tracker rates, discount rates, and standard variable rates (SVR).
How do you know which one is right for you?
This is often the most popular type of mortgage among first time buyers or people who like to budget. The interest rate stays the same (i.e is fixed) for the initial period of your mortgage. This means you know exactly what you are going to be paying each month for a specific period of time so there are payment increases.
Fixed rate mortgages are typically taken out over a period of 2, 3, 5 or 10 years before returning to a lenders SVR for the remainder of the mortgage. At this stage we would be in contact with you to discuss looking at your options to potentially re-mortgage or switch your mortgage to a new rate with your current lender.
A tracker rate mortgage is very similar to a a lenders SVR rate mortgage. The main difference between the two is that a tracker mortgage follows the Bank of England base rate, rather than the lender’s (SVR).
Although lenders normally change their SVR as a result of The Bank of England Base Rate changing, however, they don’t have to change them by the same amount and a mortgage lender can change their SVR even without a base rate change. This can lead to some uncertainty of mortgage payments chaining frequently. With a tracker rate, the mortgage tracks the base rate by a set rate, usually above the base rate. Some tracker rates will have the benefit of not having any early repayment charges and you can also normally have a tracker rate for 2, 3 or 5 years.
A discount rate mortgage is where the interest rate is discounted below the lender’s standard variable rate (SVR) for either a set period (e.g. two or five years) or for your whole mortgage.
The SVR is an interest rate set by your lender, which it can raise or lower by any amount and at any time. A discount mortgage is a type of variable-rate mortgage, meaning the amount you pay could change from month to month.
A SVR interest rate isn’t set or fixed and can therefore go up and down throughout the mortgage term. Increased or reductions of the lenders SVR can be happen if the Bank of England increase the Base Rate or if inflation increases. A benefit of some SVR mortgages is not have any early repayment charges if you change or fully pay off your mortgage early.
In most cases, SVR lending rates tend to be higher than fixed, tracker or discounted rate mortgages.
Frequently asked property buying questions
What are mortgage types such as fixed rates, tracker rates, discount rates, and standard variable rates (SVR).
How do you know which one is right for you?
This is often the most popular type of mortgage among first time buyers or people who like to budget. The interest rate stays the same (i.e is fixed) for the initial period of your mortgage. This means you know exactly what you are going to be paying each month for a specific period of time so there are payment increases.
Fixed rate mortgages are typically taken out over a period of 2, 3, 5 or 10 years before returning to a lenders SVR for the remainder of the mortgage. At this stage we would be in contact with you to discuss looking at your options to potentially re-mortgage or switch your mortgage to a new rate with your current lender.
A tracker rate mortgage is very similar to a a lenders SVR rate mortgage. The main difference between the two is that a tracker mortgage follows the Bank of England base rate, rather than the lender’s (SVR).
Although lenders normally change their SVR as a result of The Bank of England Base Rate changing, however, they don’t have to change them by the same amount and a mortgage lender can change their SVR even without a base rate change. This can lead to some uncertainty of mortgage payments chaining frequently. With a tracker rate, the mortgage tracks the base rate by a set rate, usually above the base rate. Some tracker rates will have the benefit of not having any early repayment charges and you can also normally have a tracker rate for 2, 3 or 5 years.
A discount rate mortgage is where the interest rate is discounted below the lender’s standard variable rate (SVR) for either a set period (e.g. two or five years) or for your whole mortgage.
The SVR is an interest rate set by your lender, which it can raise or lower by any amount and at any time. A discount mortgage is a type of variable-rate mortgage, meaning the amount you pay could change from month to month.
A SVR interest rate isn’t set or fixed and can therefore go up and down throughout the mortgage term. Increased or reductions of the lenders SVR can be happen if the Bank of England increase the Base Rate or if inflation increases. A benefit of some SVR mortgages is not have any early repayment charges if you change or fully pay off your mortgage early.
In most cases, SVR lending rates tend to be higher than fixed, tracker or discounted rate mortgages.
Frequently asked property buying questions
What are the steps and people involved when buying a property?
Buying a home is one of the biggest financial decisions you will make, so it’s important you know what to expect.
Speaking to Parkview Mortgages at the very beginning of the house buying process will enable you to work out how much you could borrow, how much you can afford to repay and what kind of mortgage might be right for you.
We offer a free of charge mortgage and protection services, asking questions to get to know you and understand more about your situation. This consultation can be done face-to-face or virtually and last approximately thirty minutes to one hour.
After this, we will then be able to advise you on how we can help and the products that are available, putting you in a good position to secure your Decision in Principle (DIP)/Agreement in Principle (AIP).
This is a big step which should not be rushed. Its advisable to have viewed the property at lest once before you make an offer to buy. The offer is not binding at this point, estate agent is legally obliged to pass on all offers to the vendor. The seller is not obliged to accept any offer which they don’t want to accept.
If your offer is accepted, this is the point we advise to proceed and get your DIP / AIP.
At this point you should receive a memorandum of sale from the estate agent which outlines your offer in writing and provides details of the legal representatives for each party and the sellers and property details.
The short answerer is yes, you do.
Buying a home is one of the biggest financial decisions you will make, so it’s important that your purchase is done correctly and legally. A solicitor / conveyancer will carry out the legal checks on the property, complete the legal work for your purchase and, if you are getting a mortgage, ensure it meets your lender’s requirements.
We strongly advise you appoint a qualified legal representation who is on the mortgage lenders panel. If your chosen legal representative is not on the mortgage lenders panel, the mortgage lender will insist their legal representatives review the legal work carried out by your legal representatives, charging you for this extra work.
Before a mortgage application can be accepted, your lender will instruct a surveyor to carry out a valuation.
A standard mortgage valuation for lending purposes is required by all lenders, but there are other types of more detailed surveys available. All valuations are carried out during the mortgage application and before a binding offer is made. If a survey reveals serious problems, you are free to withdraw your offer as you have not exchanged contracts yet.
If the problem can be fixed and depending on its severity, you might be able to negotiate a lower price on the property to cover any additional expense you are likely to incur. If you do renegotiate a price reduction, the mortgage lender needs to be informed ASAP. We will do this for you.
Getting the right type of insurance is vital as it can help protect you, your family and your property when things don’t go to plan or when something serious happens.
As part of our duty of care and service to you, we will explain all of the options and put in place the correct policies for you and your families’ individual requirements. This is certainly not a one size fits all process and you will receive full advice on this from Parkview Mortgages.
Buildings insurance.
While it’s not a legal requirement, almost all mortgage lenders require you to have buildings insurance in place when you exchange contracts. Your Solicitors will normally check this. It’s the minimum level of insurance required by most lenders and as a result, your chances of getting a mortgage without it are very slim. Buildings insurance covers the cost of rebuilding your home if it’s damaged or destroyed and covers the fixed items in the property. Garages, sheds/outbuildings, and fences can also be covered, as is the cost of replacing items such as pipes, cables and drains.
Contents insurance. Contents insurance covers your possessions in the event of theft, loss or damage, including natural disasters, fires or flooding. You can also upgrade the policy to cover you for items away from the home and for specific items that you want to protect. It may be cheaper to buy buildings and contents insurance together – but you can also purchase them separately if required.
Life Insurance.
It’s not mandatory to have life insurance to get a mortgage, but it will be something you should consider, particularly if you have someone who relies on you financially.
Income protection insurance.
Without a steady income, paying bills on time and keeping up with mortgage repayments can become impossible. Ensuring that your income continues should you be unable to work is an important part of ensuring that you are financially secure.
Critical illness Insurance. With 1 in 2 people in the UK now being diagnosed with Cancer at some point in their life, Critical Illness cover has never been so important.
In the UK, the 4 most common types of cancer are:
breast cancer
lung cancer
prostate cancer
bowel cancer
Critical Illness cover can provide invaluable help at the time of greatest need, often helping with mortgage repayments, getting access to the best treatment options, or replacing a partner’s income to provide additional support.
When it comes to buying a home, it is important to remember that it isn’t just the deposit you need to pay for. There are also several additional costs to consider. Here are some of the main ones that you need to be aware of:
Mortgage broker fees. Parkview Mortgages will manage your entire application, from start to finish. Unlike other mortgage brokers, we choose not to charge our clients a fee, believing all customers should be able to access free mortgage and protection advice. Like all mortgage brokers, we get paid a fee from the mortgage lenders when we submit a mortgage and it subsequently completes. Likewise we get paid a fee from insurance providers for any insurance policies we advise on which go on risk. This is why we can offer our clients a fee free advisory service.
Stamp Duty. You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland. How much you pay depends on the value of the property. You can find out more about stamp duty on the UK government website.
Legal fees. A Solicitor or licensed conveyancer will carry out all the legal work when it comes to buying and selling your home. We would be able to obtain a suitable quotation for you at the beginning of the process.
Valuation fees. During a valuation, the mortgage lender will look at the value of the property to work out how much they are prepared to lend you. Most lenders will now offer a free basic mortgage valuation as part of the mortgage application, if you require more detailed surveys in many cases this will be at your own cost and this would vary depending on the value of the property.
Removal costs. Hiring a company to move your belongings can cost hundreds and depending on how much you have and how far you’re moving, sometimes thousands of pounds. The price will depend on the size of the property and if you want them to pack and/or unpack for you. If you want to save yourself some money, you could always hire a van and ask family and friends to help you.
Mortgage lender fees. The lender may also have fees that are associated with the mortgage, these may include an arrangement fee, valuation fee and telegraphic transfer fee. We would discuss all the fees with you before applying for a mortgage.