Mortgages

Mortgages are loans which allow buyers of property to raise finance to buy real estate.  There are various types of mortgages but the main types are shown below. Presently the cost of mortgages are at historically cheap levels.

First time buyer mortgages are for people looking to buy their first property. The government have also launched the “help to buy scheme” which helps first time buyers and home movers for those who can only raise a 5% deposit or a 95% loan to value (LTV). Fixed rate mortgages are products which have a fixed rate for a set period of time. This means that your monthly mortgage payment will remain at the same amount for that given period of time. At the end of this period, normally the rate switches to a variable rate. Variable rate mortgages are products where banks can move the interest rate charged often these moves track changes made by the Bank of England to its interest rate. With variable rates, it’s always important to consider if you can afford your monthly payments if the Bank of England interest rate goes up. If you are looking to buy a property to rent out then you will need a specialist buy to let mortgage.

Following the financial regulators review of the mortgage market known as the Mortgage Market Review (MMR), it has introduced much tighter requirements when applying for a mortgage. This has been introduced to increase consumer protection and ensure that lenders act responsibly. You will have to show evidence of your income, such as payslips and bank statements, and your outgoings, including other debt repayments, household bills and living costs such as travel, clothing, entertainment and childcare. Lenders will have to check you can afford the mortgage and also “stress test” that you will be able to afford the mortgage payments in the future if interest rate charges  were to rise.

The Mortgage Credit Directive (MCD) came into force on the 21st March 2016 and introduced an EU-wide framework of conduct rules for mortgage firms. You can read more about this on the FCA website.