"There is no value in life except what you choose to place upon it and no happiness in any place except what you bring to it yourself."
Henry David Thoreau
Author
Types of mortgages
Your home is the largest purchase you’re likely to make.
Choose wisely.Â
To fulfil your ambition of buying a home, you are most likely going to need a mortgage. There are many different options available, each of which have many pros and cons. Make sure you consider each before you make your decision.
Here To Help
Whether you’re buying your first home, hunting for a new one or simply looking to invest, this purchase is likely to be one of the biggest you’ll make. Â Before you arrange your mortgage, make sure you know what you can afford to borrow. Find out where to get a mortgage, the different types and how the process works.
,When you take out a mortgage, the number one question is usually, ‘How much will I have to pay each month?’ The answer depends, of course, on how much you borrow – but also on what mortgage deal you have.
CHOOSE THE ADVISER WHO UNDERSTANDS YOUR NEEDS.
Types of mortgages
- Residential
- Commercial
- Repayment
- Buy-to-let
- Interest only
- Combined
Mortgages can cover anything from homes to business premises, the only difference being how they are repaid. Follow our guide for more mortgage information.
I’m buying a home
To buy a home, you will need a residential mortgage which has three options available:
- Repayment mortgage:
You gradually pay back this loan with a regular monthly payment over a term period (normally 25 years). When your mortgage term is over, everything is repaid. - Interest-only:
Any monthly repayments only pay the interest on the loan meaning a smaller amount is paid. At the end of the term, you will have to pay back the original borrowed amount. By using savings, investments, or selling the home. - Combined rates:
This means the repayments are a mixture of the two above options. Â
I’m going to build a home
You might fancy a project so could be tempted to buy a plot of land rather than an existing home. This kind of job would require a self-build mortgage which would cover the cost of the land and the amount you need to build your new home.Â
With this kind of mortgage, you’ll receive instalments, as opposed to a lump sum like a residential mortgage. This allows the lender to track your spending is just on the home.Â
I want to do a buy-to-let
A buy-to-let mortgage is a secured loan for people who want to buy a property, whether a house or flat, then rent the property out to tenants.  Buy-to-let mortgages generally need a larger deposit than residential mortgages and the interest rates are typically higher.  You will need a bigger deposit to apply for one of these mortgages.Â
I’ve got to buy a business space
A commercial mortgage is required to be able to purchase a space for business. This again, comes with a larger risk for lenders which can have an effect on what you can borrow; it is normally significantly lower than a residential mortgage.
These are both repayment and interest only so make sure you talk to your mortgage adviser to clarify which would be most suitable for you.
What’s my borrowing limit?
This often depends on many factors, things like how much you earn, how much you spend, where your income comes from. It also relies on the size of your deposit, and how much your property is.
What are the benefits of a mortgage adviser?
With a mortgage adviser, you will receive an unbiased and fair insight into the mortgage market, revealing what’s suitable for you and your life. They will be able to explain your likely monthly repayments and how much they feel you would be able to afford, as well as help you build a strong mortgage application to fulfil your dreams.
Applying for a mortgage has become harder and harder overtime and they often require a lot of patience and help. Having an adviser on hand can help relieve stress and help you feel comfortable with the decisions being made.
Be Prepared
When dealing with a mortgage provider, you will be expected to present details of your finances. These include proof of payment over the last four months, and a view of any monthly outgoings. Don’t lose precious time looking for these after your initial meeting with your adviser, have them ready. Those few days hunting for these could be make or break in the chase of the property market.
Try to stay focused
There is a lot of choice out there in the world of mortgages and sometimes it can be too overwhelming. Watch out for any possible ‘traps’, like low interest rate offers or amazingly long fixed-interest terms. Don’t be hoodwinked by the shiny deals, make sure you get one that’s the best value for you and ticks all the boxes you need. A mortgage adviser can help you identify this and make the whole process easier and simpler to understand.
Fixed isn’t always best
It’s tempting to sign up to a fixed-interest mortgage when interest rates are low. However, although you know when you need to make your repayments, you could end up worse off. You are normally tied for a long period of time, so a re-mortgage is off the table unless you pay a charge.
Consider your future as well as your present when choosing a mortgage; what do you need from it in three or five-years’ time?
Couple politics
Involving more people in a big financial decision can make things more complicated. Couples often look to borrow a mortgage together as their relationship grows, and it’s great that you are ready to own a property and start a life together.Â
However, if one of you already holds a mortgage, switching over can create a little drama, so it’s worth talking to a mortgage adviser to ensure no one loses out when getting together.
If the relationship ends, mortgage terms will change, especially if one partner wishes to stay in the home. You will need to prove that you can make this new level of repayments, and bear in mind that the partner leaving will still have some equity in the house. Legal advice is crucial at this stage, to ensure the deal is fair.
Watch out, interests about!
When you get a mortgage, you will be paying interest on the whole loan. Therefore, it’s wise to keep it as low as possible, paying off as much as you can upfront. Take your time with mortgage applications to ensure you get the right one for you and your life goals.
Abacus Associates manages the personal wealth of many people across the UK and over £1 billion of investments, providing clients with financial advice and access to investment products and services.
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