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FAQS

Q: What is a Mortgage?

A: A mortgage is a form of loan, which is taken out against property (real estate) such as a house, flat or an apartment. A mortgage cannot be taken out against any other assets such as a vehicle, stocks and shares or other investments.

When taken out against an office, a shop, a factory or a premises used for business purposes, it is known as a commercial mortgage. If the loan is against a property which the owner intends to rent out to other tenants, it is a buy to let mortgage.

Other mortgage-related terms:

  • Mortgagee - these can either be the person who takes out the mortgage, or it can be the bank or building society which provides the loan.
  • Lender - this is the usual term for the organisation making the loan. In the UK, this is usually a bank or building society.

Q: What is a remortgage?

A: This is when the terms of the original mortgage are renegotiated and does not necessarily have to involve moving home or taking out a second mortgage. You can remortgage simply to get a better interest rate deal than you are currently on or when your current deal comes to an end if you are on a short-term fixed rate or tracker mortgage.

Although you can remortgage to raise money for home improvement or other projects by extending your loan, this will depend on how much equity you have in your home and if your property has risen in value.

Q: Who do I remortgage with?

A: You can remortgage with your current lender or another one if it's offering a better deal by effectively transferring your current mortgage from your present lender to another. Your property will usually need to be valued again although your lender may help towards the costs of a valuation survey and legal fees.

Q: Can everyone remortgage?

A: No. If you've got insufficient equity in your home then you won't be able to remortgage - so if your current mortgage is close to the value of your home, then you'll find it hard to remortgage to get a better rate deal and it will be very difficult to raise extra cash. If you are behind with your mortgage payments, then you can't usually remortgage.

Q: How do I work out whether it's worth remortgaging?

A: If you're doing it for rate reasons, make sure you'll save money by remortgaging. You'll have legal costs, as well as valuation, and possibly arrangement fees. Lenders often offer to pay these to attract new borrowers.

Also, check whether your old lender will charge you for paying off your old mortgage deal before moving. Do your sums first to make sure the costs don't outweigh the value of remortgaging onto a lower rate: this is possible particularly if you've a small outstanding mortgage.

If you're doing it to raise money, for instance to pay off a personal loan or credit cards, remember your repayments will rise and you'll pay more interest in the long-term as you'll be paying back these debts over the term of your mortgage.

Your outgoings matter

Mortgage providers will look at your other outgoings in order to determine how much money you have available for mortgage repayments at the end of each month after all your other payments have been made. Before approaching a lender, it is worth ensuring that you have calculated your usual monthly expenditure.

In particular, banks will be interested to know about:

  • Alimony, child-support, or other similar payments.
  • Your typical monthly household utility bills, including mobile and landline telephones.
  • How many mouths you have to feed each week.
  • Your expenditure on your car or other method of transport.
  • The payments into saving plans, Isas, your pension, or other investments.

In addition, you should also be able to provide details of any additional income you may be receiving, such as rent, share dividends, benefits or bonuses.

Your salary

Although a higher salary should obviously mean a larger borrowing entitlement, if a substantial amount of your pay packet is made up from commissions, share dividends or other bonuses, then lenders may not look at this as favourably as a lower but more stable income. This can vary a great deal from one lender to another, so if your salary is highly variable, it is well worth shopping around.

Self-employed

Traditionally, it has been difficult for self-employed people to arrange a mortgage, due to the fluctuating nature of their income, but there are a number of lenders who are more accommodating than others. Many banks ask for three years worth of profit and loss statements in order to determine the risks involved in lending to a sole trader.

Company directors

People who draw their income from a company in which they own a substantial share - usually above 15%, can also find themselves classified in a similar way to self-employed people by some lenders.

 
 
Lender Initial Rate Duration Standard Rate Overall Cost For Comparison Max Loan To Value Fee
2.59% 2 years 5.69% 5.4% APR 75% £999
2.69% 2 years 4.99% 4.9% APR 75% £495
2.94% 2 Years 5.69% 5.4% APR 75% £199
2.99% 2 years 4.99% 4.9% APR 85% £495
2.99% 3 years 4.99% 4.6% APR 70% £499
3.0% 2 years 5.69% 5.5% APR 80% £999
3.19% 5 Years 4.79% 4.2% APR 80% £995
3.35% To Jul 2014 4.95% 4.6% APR 75% £999
3.5% 2 years 5.49% 5.1% APR 75% £595
3.84% 2 years 3.94% 4% APR 90% £499

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