Whether buying your first home or re-mortgaging, understanding the landscape of mortgages, and navigating countless options induces questions from borrowers. Here are answers to some of the common questions raised when applying for or managing a mortgage:
How Much Deposit Do I Need?
Minimum deposit requirements generally vary between 5-15% of total property value, depending on factors like loan type and your credit. While 5% is possible, larger deposits like 10-20% secure better rates, lower lender fees, and increase borrowing power. Save diligently before applying.
Does My Credit Rating Affect Mortgage Chances?
Yes, lenders check your credit history to ascertain your repayment reliability based on past borrowing behaviour. Defaulted debts or court judgments damage chances for favourable rates. Review your reports and correct any errors immediately.
How Are Mortgage Payments Calculated?
Mortgage payments comprise two primary components – the interest owed each period on loan balances, and contributions to reducing the total principal debt itself. Interest is charged based on current rates, while principal payments steadily build equityThe difference between the value of the property and the amo... in the property as debt decreases.
Should I Use A Mortgage Broker?
Brokers enable access to better rates and niche products from numerous lenders compared to applying yourself, saving substantial money. Good brokers manage the entire application seamlessly. But do your own market research too to identify brokers finding your optimal deal, not just an acceptable one.
Does Repayment Type Affect My Options?
Lenders assess affordability and risks differently for varying repayment types. Repayment mortgages paying interest and principal monthly qualify borrowers for the widest selection of deals. Interest-only plans suiting shorter terms require substantial lump sum payments, so require larger deposits and excellent credit.
Can I Get A Mortgage On A Fixed Term Contract?
If you have at least 6 months left on your contract term, plus renewal likelihood demonstrated through sequential rollover, lenders may still consider you for a fixed-term contract mortgage, but often at higher rates. Provide emphatic evidence of career stability and income continuity if changing roles frequently. Underwriters carefully weigh risks. If you need a mortgage on a fixed-term contract, find a broker with experience who can talk you through the process. Look for great reviews and excellent customer service.
How Do I Select Between 2-Year, 5-Year, Or 10-Year Fixed Rates?
Shorter fixed terms of around 2-3 years allow capitalising quickly when market rates drop through re-mortgaging but prevent savings if they rise. 5-year fixes offer a middle ground, while 10-year fixes provide payment certainty through higher or lower rate swings at the expense of flexible re-mortgaging.
Does Job and Income History Matter?
This can be a tough one as the job market isn’t always ideal. But Lenders assess your employment stability and income sustainability to estimate repayment abilities over decades. Steady longevity with an employer often provides the best profile. Explain any gaps. Additional income sources contribute to affordability calculations too. Provide all documentation lenders require.
How Can I Get The Best Mortgage Rates?
Securing better rates relies on factors like substantial deposits, strong credit, stable employment in lucrative fields, minimal existing debts, purchasing modestly priced homes and additional collateral or guarantors able to offset lender risk. The stronger your profile, the better the rates lenders extend.
Mortgages appear complicated at first but become less mystifying as you educate yourself on the process, terminology, and options. Arm yourself with knowledge and access the best advice to secure terms benefitting your needs and future financial stability.