Mortgage Basics

Information for Mortgagers in the UK

House Mortgages Information At Cheap Mortgages we have put together some useful information covering the basics in finding and getting a mortgage in the UK.

Within this website we cover some basics in great depth but below is a concise guide to some of the basics.

What is a mortgage?

A mortgage is not in fact the laon itself but the legal document that puts up the property as security for the loan.

What is the average length of a mortgage?

This can vary and may depend on your age but the average length is 25 years.

There are two parts to a mortgage

There is the capital - the money borrowed and there is the interest - the charge made by the lender until the loan is repaid. The longer the length of time the loan is taken for the smaller the monthly payment is.

Credit Status

To ensure you will be able to keep up repayments on your mortgage your potential lender will look at your credit worthiness. They will score you against its own lending criteria and also against stanard credit scoring agencies. If using a broker your broker should be able to judge which lenders will look more favourably at your own particular situation.

How much can I borrow?

You will generally need to look at your gross income before tax is deducted and some lenders will look at regular overtime or bonus payments too. As a general rule if you are a single applicant 3 1/2 times your annual salary is the amount you could borrow and if it is a joint application then normally 3 times your joint annual salaries.

You can use our calculator to estimate how much you can borrow on a mortgage.

What does Loan to Value LTV mean?

This is the percentage of the value of the property against the amount you are borrowing. So if a house is valued at £100,000 and the LTV is 95% then you could borrow £95,000 as long as your salary multiples are adequete.

What is adverse or bad credit?

Adverse or bad credit is the term given to people who have perhaps late paid a bill or previous mortgage or have a CCJ County Court Judgement against them. Often people are unaware that they have a poor credit history until they apply for a mortgage or loan. Over three million people in the UK have CCJs and once you have a CCJ it stays on your record for 6 years.

Can I still get a mortgage if I have adverse credit?

You can get a mortgage with bad credit and there are specialist products and lenders for this market.

How do I repay my mortgage?

There are a few options available. These are repayment, where you pay part of the loan amount back each month including the interest. Or there is an Interest Only option where you only pay the interest on the loan each month. At the end of the term of your mortgage you must then pay the lender back the initial amount of the loan the 'capital' and this may be through an Isa, Endowment policy or Pension plan.

What mortgage types are available?

There are in fact thousands of different mortgage products available but most come within 6 different types. These are Variable, Fixed, Capped, Discounted, Tracker and Flexible rates.

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