Getting a mortgage for the first time can be a daunting prospect; but it need not be. At Mortgagez we are here to help you every step of the way to finding your ideal property and best of all, our service is fee-free when you go via our online portal. So here’s our brief guide to help get you started with your first mortgage.
What is a mortgage and how does it work?
With the money you have saved for a deposit, you can then put that down against the purchase of a property. The difference between your deposit and the property purchase price is the capital you need to borrow in order to complete the purchase. The lender charges you interest on the capital borrowed until it is repaid.
How do I obtain a mortgage?
The good news is there is help out there! One of the easiest ways to start looking for a mortgage is by using a mortgage calculator like the one we offer online at Mortgagez. Unlike other online mortgage brokers, Mortgagez don’t require any personal details from you to get an idea of your budget and compare live results of deals that are available. By obtaining a quick quote, it can instantly show what you can and can’t afford given your current earnings and deposit. It also factors in if you are applying on your own or making a joint application. Our online calculator is easy to use and it takes less time to obtain a quote than it does to boil a kettle! It won’t even affect your credit score when you obtain a quick quote with us.
Once you’ve obtained a quote, simply provide us with your details and we can send you a snapshot of your quote if you would like to save it. You can also speak to one of our qualified mortgage advisers once you have registered with us, who can talk you through your options and advise on the best product for your circumstances. Best of all – our service is completely free when you go via our portal. For a brief guide on ‘How it works’ at Mortgagez click here.
Other options to obtain a mortgage aside from a broker like Mortgages could include speaking to your bank or building society and choosing from their range of mortgages. Alternatively you could speak to a financial adviser. It’s worth bearing in mind that some mortgage brokers will offer mortgages from the whole of the market (like we do at Mortgagez) whereas others will be more restricted and only offer from a limited range of mortgage providers. So it’s worth checking this if you don’t already know. Ultimately, taking some form of advice will almost certainly be best unless you are very experienced in financial matters generally and are prepared to shop around for the best deal. Finally on this point – advice pays but you don’t have to pay for it when you use our online portal at Mortgagez.
Mortgage types explained
The type of mortgage you are able to apply for will depend on whether you only want to repay interest on the capital borrowed (known as an interest-only mortgage) or repay both the interest and the capital at the same time (known as a repayment mortgage).
Repayment mortgage: with repayment mortgages you pay the interest and part of the capital off every month. At the end of the term, typically 25 years, you should manage to have paid it all off and own your home.
Interest-only mortgage: with interest-only mortgages, you pay only the interest on the loan and nothing off the capital (the amount you borrowed). These mortgages are becoming much harder to come by as lenders and regulators are worried about homeowners being left with a huge debt and no way of repaying it. You will have to demonstrate that you have a separate plan in place to repay the original loan at the end of the mortgage term.
You can also ask your lender whether they offer a combination of both the options explained above but not all will offer this option. Effectively a combined option means you can split your mortgage between repaying a proportion of the capital borrowed and a proportion as interest-only. The benefit is that you won’t have the entire amount of capital borrowed to pay off at the end of the term but equally, monthly repayments can be cheaper than if the entire capital amount was structured as a repayment mortgage.
To fix or not to fix?
A choice almost every mortgage applicant will have to make is whether you prefer a fixed or variable rate product. Fixed rates tend to be more expensive but give the buyer peace of mind that the monthly payments will not change for the predetermined term. Variable rates move with the market so if rates are low this option can initially appear cheaper than a fixed rate but there is clearly more risk if you are on a tight budget and rates start increasing. Here at Mortgagez we can run through all of your mortgage requirements to advise you on the most suitable product for your circumstances. Our service is fee-free when you go via our portal. For more detail on mortgage types also see our Guide: Fixed rate or standard variable rate?
How long do you want your mortgage to be?
Another aspect to consider is the length of your mortgage which is often referred to as the ‘term’ of the mortgage. This is how long it will take you to pay off the money you borrowed, plus interest and fees, in total. Typically this is set for 25 years although the number of people taking out a 30+ year mortgage has doubled in the last ten years. Don’t worry if that seems like a long time frame to be tied down for. In reality you’ll most likely need to remortgage at some stage and there will be an opportunity to adjust the term or amount of your mortgage as your circumstances change or you decide to move to another property.
A longer mortgage term will reduce your monthly payments but increase the amount of time it takes you to pay off the loan. It will also increase the total amount you will end up having to pay back as your interest charges will be higher as a result of the longer term. You can easily change the length of your mortgage on the Mortgagez portal. Simply edit your quote by clicking the box ‘Edit details’ to see the difference the mortgage term will make to your monthly repayments.
What if you haven’t quite got enough to get your first mortgage?
Government schemes, such as Help to Buy, are certainly worth exploring. The government offers a variety of schemes such as equity loans and shared ownership. You can read more about these schemes on the help to buy website https://www.helptobuy.gov.uk/
Applying for a mortgage
Once you’ve obtained a quick quote to get an idea of what you can afford, applying for a mortgage is usually a two-stage process.
The first stage usually involves the lender or mortgage broker asking you a series of questions to help you work out how much you can afford, and which type of mortgage(s) you might need. With Mortgagez this is all carried out via our online portal so you aren’t under any pressure to complete it but you can of course speak to us as well if you need further guidance or support. This stage will help to determine your financial position and a mortgage in principle (MIP) can be obtained from your chosen lender indicating how much they might be prepared to lend you. You will also receive all the key information relating to the product they are offering you and any fees or charges that are applicable. It can also be very useful to have this kind of information ready before you start viewing properties as it will send a clear message to the vendor and agents that you are a serious buyer.
The second stage is usually where your full application with the mortgage lender begins. The lender will conduct a more detailed affordability check, and if they haven’t already requested it, evidence of your income and anything else relating to your application. When you use Mortgagez we will guide you through every step of this process via our portal with integrated application tracking from start to finish so the same information never needs to be provided twice. We can also offer you a range of independent solicitor options so, unlike other online mortgage brokers, everything you need for your mortgage is all under one roof with us.
Once you have completed your full application your final mortgage offer will be issued enabling you to proceed with the purchase of your property.
Don’t worry – further help is on hand
Don’t worry if all of the above might seem like quite a long journey. Obtaining a mortgage is one of the biggest commitments you will ever make and so there is quite a lot of detailed information required.
At Mortgagez our aim is to find you the best mortgage deals from across the whole of the market, saving you both time and money. We don’t charge a penny for our service via our portal and will be with you every step of the way to help you get the mortgage you want.
So for an up-to-date view, why not compare and secure the best mortgage deal for you TODAY by completing a quick quote online and seeing how much money you could save.
YOUR HOME MAY BE REPOSSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE
Any guidance and/or advice contained within this document is subject to the UK regulatory regime and is therefore restricted to consumers based in the UK. Any technical or regulatory information contained within this document was correct at the time of producing it but as it may be subject to change it should not be exclusively relied upon when making a financial decision. The Financial Conduct Authority does not regulate advice on Buy to Let mortgages.
Article written: June 2020
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