Welcome to The Mortgage Clinic Ormeau Road Belfast, today, we’re breaking down the basics of mortgages to make this important topic easy to understand.
What is a mortgage? In simple terms, it’s a loan you take out to buy a property. Typically, you borrow the money from a bank or building society, known as the “mortgage lender.” You can secure a mortgage on your own or as a joint mortgage with one or more people.
Today, when we talk about a mortgage, we’re referring to both the loan itself and the legal agreement between you (the borrower) and your lender. At The Mortgage Clinic Ormeau Road Belfast, we aim to make this process as smooth and straightforward as possible for you.
How Do Mortgages Work?
Before you sign the contract, you and your lender will agree on specific terms and conditions, such as:
- The mortgage term: This is the duration over which you’ll repay the loan.
- The mortgage rate: This is the interest rate your lender will charge you over the term.
- The repayment method: You can choose between repayment or interest-only options.
What is a mortgage term?
At The Mortgage Clinic Ormeau Road Belfast, we often see mortgage terms ranging from 5 to 40 years, with most people opting for terms up to 35 years. The mortgage term is the number of years you take to pay back your loan.
A shorter term means higher monthly payments but allows you to become mortgage-free sooner, potentially saving you money in interest over the life of the loan. Conversely, a longer term means lower monthly payments, but you’ll pay more in interest over time. We can help you find the best term that fits your financial situation.
What is a mortgage rate?
Mortgage lenders, including those at The Mortgage Clinic, lend money to earn interest. When you take out a mortgage, you’ll repay the amount you borrowed plus interest. You agree on an interest rate before signing the contract.
At the end of your fixed-rate term, you can remortgage—either with a different lender or by negotiating a new rate with your current lender. We at The Mortgage Clinic Ormeau Road Belfast can guide you through the remortgaging process to ensure you get the best deal.
How Do You Repay a Mortgage?
When selecting a mortgage deal, you can choose how to repay the loan: either interest-only or repayment.
- Interest-only: With this option, you pay only the interest each month. While your monthly payments are lower, they don’t reduce the loan’s principal amount. At the end of the term, you’ll need to pay off the entire loan balance, which might mean saving up over time or selling your property.
- Capital and interest (repayment): Each month, you pay both the interest and a portion of the principal loan amount. This reduces your loan balance over time, and by the end of the term, you’ll have paid off the entire loan. This is the more common method and ensures that you steadily reduce your debt.
At The Mortgage Clinic, we can help you decide which repayment method suits your financial goals and lifestyle best.
How Do You Get a Mortgage?
To secure a mortgage, you’ll need an upfront payment called a deposit, typically ranging from 5% to 10% of the property’s purchase price. For instance, if you want to buy a £180,000 house, you’ll need a deposit between £9,000 and £18,000, with the remaining amount borrowed from the mortgage lender.
The size of your deposit affects your loan terms. Generally, the larger your deposit, the smaller your loan, and often, the lower your interest rate. Many lenders reduce mortgage rates for every 5% increase in deposit size.
At The Mortgage Clinic Ormeau Road Belfast, we can guide you on how much deposit you need and help you find the best mortgage deals available.
What Else Do You Need to Get a Mortgage?
Besides a deposit, lenders will assess your eligibility based on several factors:
- Your age (you must be at least 18)
- Your UK residency status (typically, you need to have lived in the UK for at least three years)
- The amount of money you wish to borrow
- Your savings for a deposit
- Your credit score
- Your employment status and income
- Your existing debts
- Your spending habits
- The type, size, and location of the property
Lenders use this information to determine your “affordability,” ensuring you can repay the loan. At The Mortgage Clinic, we assist you in navigating these requirements and preparing your application to maximize your chances of approval.
How Much Does a Mortgage Cost?
It’s important to consider not just your deposit but also the additional fees and taxes involved in getting a mortgage. Here are some typical costs:
- Stamp Duty Land Tax (SDLT): This tax applies to property purchases in England and Northern Ireland over £125,000.
- Arrangement Fee: This is an administrative fee paid to the lender for organizing your mortgage. It’s typically around £999, but for larger mortgages, it can range from £1,499 to £1,999.
- Booking Fee: You pay this fee when submitting your mortgage application to secure the rate you want. It usually ranges from £100 to £250, though some lenders may roll it into the arrangement fee or waive it. Note that this fee is often non-refundable.
- Legal Fees: You’ll need a property solicitor or conveyancer to handle the legal aspects of buying a house, known as conveyancing. Legal fees can vary based on the property price and whether it’s freehold or leasehold. Typically, you can expect to pay between £1,000 and £1,500 for legal services.
- Valuation Fees: Lenders require a property valuation to ensure it’s a sound investment. This fee varies depending on the property price and can range from £150 to £1,500. Sometimes, an administrative fee is also charged to arrange the valuation.
- Bank Transfer Fee: Banks charge a small fee for transferring large sums of money between accounts, such as from the lender to the solicitor. This fee usually ranges from £25 to £30.
At The Mortgage Clinic Ormeau Road Belfast, we help you understand and navigate these costs, ensuring you’re fully prepared for the financial commitment of a mortgage.
Can You Apply for a Mortgage Before You’ve Found a Property?
The short answer is no; you cannot apply for a mortgage until you’ve identified a specific property to secure the loan against. However, you can start planning and obtain a mortgage in principle (MIP).
An MIP is a certificate indicating how much you can afford to borrow, which shows estate agents and sellers that you’re serious about buying and financially capable. At The Mortgage Clinic, we can help you obtain a mortgage in principle, giving you a head start in your property search.
What Happens if You Can’t Repay Your Mortgage?
A mortgage is a secured loan, meaning it’s backed by the property you’re buying. If you’re unable to make repayments, the lender can repossess your home and sell it to recover their money. However, lenders are not always quick to repossess; they often work with you to find a solution, such as lowering monthly payments, changing payment dates, or offering a short mortgage holiday.
The team at The Mortgage Clinic Ormeau Road Belfast is dedicated to helping you understand your mortgage options and providing support if you encounter financial difficulties.
The Next Steps
So, what exactly is a mortgage? It’s a long-term loan designed to help you buy a property. While the process may seem complex, it doesn’t have to be daunting. At The Mortgage Clinic, we aim to simplify the mortgage journey for you.
If you’re ready to apply for a mortgage or need more guidance on choosing the right deal, our team at The Mortgage Clinic Ormeau Road Belfast is here to help. We offer expert advice and personalised support to ensure you make informed decisions and secure the best mortgage for your needs.
Contact Us
Visit The Mortgage Clinic Ormeau Road Belfast for all your mortgage needs. Our experienced advisors are ready to assist you in navigating the mortgage process, from initial consultation to securing your dream home.
