For mortgages and home loans the process can be complicated and frustrating. This is not made easier by the number of different types of mortgages and home loans available, the varying literature and the wealth of documentation that is required.
Why Census Financial Planning for mortgage advice?
Everyone’s requirements are different and the right mortgage advice is crucial. We can provide mortgage advice across the full range of mortgages and home loans available. We work closely with mortgage lenders and tailor the various processes to suit you.
How much can I borrow?
First of all, you should find out roughly how much a lender would be willing to lend you and if you are comfortable with the repayments. You will find our mortgage calculator a useful tool.
It is normal for the amount to be 3-4 times your gross annual income. However, due to recent economic activity, lenders are being much more responsible and will look at your overall financial health; your credit rating, credit cards, loans and general outgoings.
Here are a few important facts you need to be aware of:
- Make sure the lender is registered with the Financial Services Authority (FSA). This way you are dealing with a reputable lender and will have assistance if anything goes wrong. (Census Financial Planning only deals with lenders who are FSA registered.)
- Before signing any mortgage agreement, make sure you have read and understood the key facts document (this is a document which details the costs involved with that particular loan.)
- With any mortgage your house may be repossessed if you do not keep up with the repayments.
What are the different ways I can repay my mortgage?
- Repayment: Every month you will make a payment to the lender, this payment will go partly to reduce the loan and partly to pay interest on the loan. It guarantees to repay the full loan by the end of the agreed term.
- Interest Only: This mortgage requires you to take out some form of investment usually a pension, endowment or ISA. At the end of the term you will still owe the full amount that you borrowed but your investment will hopefully pay the lump sum and a little more. There are no guarantees that the investments will grow enough to pay off the mortgage.
- Combination: This can consist of interest-only parts, repayment parts, or a combination of both of these methods. Please note that for any part of a mortgage that is interest-only, the capital must be repaid by you at the end of its term.
There are hundreds of different types of mortgage and home loan products available.
We will find the best one for you so you don’t have to:
- Fixed Rate Mortgage: As this is fixed this means that your mortgage payment is the same amount each month. Usually a term of 2 to 5 years. Easy to budget for, however if interest rates fall you risk paying a higher rate and vice versa.
- Standard Variable Rate Mortgage: Payments vary depending on the lenders variable rate, which is based on the Bank of England’s base rate. More difficult to budget for as payments may change in line with lenders’ rate changes.
- Tracker Mortgage: Tracks the Bank of England’s base rate. Some Trackers match the base rate and others may be 1% higher or lower for example. More difficult to budget for as payments will change in line with Bank of England’s base rate changes.
- Capped Rate Mortgage: This is where a maximum limit is placed on the rate you pay. Sometimes there may also be a collar, this sets the lowest rate you will pay. Peace of mind of knowing your maximum payment and if the lender’s variable rate is below the ‘capped’ rate you benefit from reduced payments.
- Discounted Rate Mortgage: This is a discount off the lenders standard variable rate. Variable payments may make budgeting more difficult. You may see rate increases applied quicker than the rate decreases.
- Stepped Rate Mortgage: One particular deal for a period of time, then another deal for a future period, and so on until the borrower ends up on the standard variable rate. Can be attractive to people who are setting up home for the first time and have lots of initial outgoings.
- Offset Mortgage: Your accounts remain separate but work together for interest calculation purposes. Your mortgage is reduced by the funds in your savings account and current accounts. All other debts, such as your credit cards or your personal loans are also linked into the nest of products, and this allows you to repay all of your debts at the mortgage rate, which is likely to be a lot lower than the standard rate on those borrowings. If you choose to combine all your debts you MUST be aware that you are turning short-term debts into long-term debts and this could cost you more in the long run.