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Mortgage Help Guide
Do you need a mortgage? Perhaps you just need some clarification on mortgages before you hit the high street, whatever it is we are confident you’ll find the answer within our pages. One tip before we get started, always check your credit report before applying for a mortgage. Experian are the biggest credit reporting agency in the UK which means most lenders will contact them should you need credit. Get your FREE Experian credit report here.
Types of Mortgages
There are many types of mortgages still available despite lenders withdrawing many of the popular mortgage deals from the market. This section allows you to apply for a mortgage right here using our convenient mortgage comparison tables. We understand mortgages can seem a little confusing, however, once you have an understanding of the various types of mortgages and know your variable from your self-cert, you will be in a better position to choose the best type of mortgage for your circumstances – without completely relying on a broker or industry expert for advice.
We have taken the fear factor out of shopping for a mortgage by taking a straight forward look at each mortgage product. There are of course pros and cons with every type of mortgage plan, so we have laid both the positives and negatives out in plain English to help you make the correct choice.
Our comprehensive list to mortgage products is not meant to overwhelm you, but rather inform you. The good news is, with such a variety on offer, you have a better chance of finding the right mortgage.
Using a Mortgage Broker
Click here to get the answers to some common questions on mortgage brokers and the post explains the pros and cons of using a mortgage broker. A good mortgage broker has the potential to save you a lot of time and money. Instead of visiting the numerous mortgage lenders in the high street, flicking through the yellow pages or searching online, a mortgage broker should be a ‘one stop shop’
In addition to sound professional advice on what mortgage plan is best for you, the mortgage broker will also search a database of lenders to find you the best mortgage quote available.
Has the credit crunch affected brokers?
Unfortunately yes. Brokers have been hit almost as hard as consumers due to the current financial climate. Many banks and building societies have stopped using intermediaries in a bid to save money. Whenever a broker sells you a mortgage, they receives a commission from the lender. Taking away the broker means the lender keeps the cash. While not all banks have stopped using brokers completely, many have limited the amount of mortgage products a broker can sell on their behalf. This means that brokers’ hands are tied and their ability to cherry pick the best mortgage deals for first time buyers has been seriously limited.
Is the broker tied to any lenders?
It is important to ask your mortgage broker if they work with any lenders, as this will have a bearing on the quote you receive. A fully independent broker will be at liberty to search for mortgage products from any given lender. If the broker is tied to any lenders, then access to mortgage lenders will be restricted and as result so will your mortgage options.
Advantages of a mortgage broker
Before the credit crunch, aside from saving you time and money, a good broker could offer you the best mortgage deals. A mortgage broker with a lot of business will be privy to some mortgage products that may be otherwise unavailable. Also, if independent, they will receive commission from whichever lender your mortgage application is with, meaning the broker can offer exclusive advice based on your situation. A bank or building society will of course discuss your circumstances regarding a mortgage plan, but are naturally restricted to their own products.
Mortgage Jargon
Understanding mortgage jargon, or mortgage terminology will help you choose the right home loan. Interest rate terminology can be baffling but we have complied a post of 75 mortgage terms in plain english to help you along the way
Standard variable rate
The interest rate on your mortgage fluctuates with the mortgage lenders standard rate. The lender’s interest level changes in line with the Bank of England’s base rate. While you may benefit from low interest rates, you may also suffer from an interest rate hike. More….
With a standard variable rate, it is difficult to accurately predict how much you will be paying per month. Visit www.bankofengland.co.uk for more information.
Standard variable rate plus cash back
With this mortgage deal you will get a sum of cash as well as the loan. Usually you will be tied into the variable rate for a set period but the cash back facility allows you to make any necessary improvements to your new home, such as install double-glazing or buy that new sofa.
Discount rate
A discount mortgage rate enables you to pay a lower interest rate during the initial stages of your borrowing. This enables you to find your feet financially before moving to a higher rate, which is usually a standard variable rate. A discount mortgage rate is particularly popular with first time buyers.
Tracker
Tracker interest rates are linked to the Bank of England rate or some other base rate. Which means the interest rate on your mortgage repayments can go up or down throughout the term of your loan. It differs from a standard variable rate because it’s independent of your lender’s base interest rate.
A tracker works if you can afford to pay more when interest rates go up, in exchange for benefiting when they go down. However, it’s not a good idea if your budget won’t stretch to higher monthly payments.
Fixed rate
With a fixed rate mortgage, your payments are set at a certain level for an agreed period. At the end of that period, they’ll usually switch you to the standard variable rate. While you have the luxury of predicting your monthly payments (because they are not variable), you will be subject to charges for early payments.
Capped/Cap and Collar
Having a cap on a variable interest rate mortgage prevents your repayments from soaring too high should interest rates increase beyond your means. This system works for a set period, at the end of which you are usually charged the lender’s standard variable rate.
A collar simply means the opposite, whereby should mortgage interest rates fall; you will pay whatever minimum the collar is set at. Unfortunately, if interest rates fall below the collar you will not benefit.
DIY Debt Solutions
Ideally suited to debts of less than £5k with some disposable income available. Learn how to consolidate your situation and reduce your monthly payments by learning to negotiate with your creditors directly.
DIY Debt Solutions Debt Management Plan
Designed for debts of up to £15k where creditor pressure is becoming too much to handle and you may have failed to agree to an overall acceptable monthly payment with your creditors directly.IVA
Minimum total Debt of £15k to qualify for an IVA. Typically you can write off up to 75% of your debts and repay the balance over 5 years. This is a formal arrangement and failure to maintain it can have serious implications
Bankruptcy
If you have been refused an IVA or simply do not have any disposable income to come to an arrangement with your creditors Bankruptcy may well be your best option but professional help and advice is strongly recommended before entering into any formal arrangements.