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CAN I AFFORD A MORTGAGE

The key to mortgages is finding the right balance between borrowing enough to finance your home, but not too much that it becomes a problem to repay

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We'll make sure you can afford your mortgage payments.

We'll make sure you can afford your mortgage payments.

To find the right balance when it comes to mortgages, you need to borrow enough to cover the cost of your home, but not too much that you struggle to pay it back. Check out our mortgage affordability calculator to see what you can borrow & what your monthly mortgage payments may be. The best solution if your not sure if you can afford a mortgage or what mortgage is affordable, we’d really like to help. Our expert mortgage advisors are very flexible and offer appointments over the phone, via video call or face to face, wherever & whenever you feel comfortable. We can chat from 08:00 - 20:00 and the call is completely free to you.

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The importance of affordability

For most of us, buying a home will be the biggest financial decision we’ll ever have to make. Our mortgage affordability calculator will help you estimate how much you can afford to borrow to buy a home. We’ll work it out by multiplying your income by 4.5 added to your deposit. The exact amount you can borrow will depend on your specific circumstances and requirements, plus individual mortgage lender borrowing criteria.

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When finding a mortgage product that will meet your requirements, both your income and outgoings will play a part.

The EU Mortgage Credit Directive of 2015 introduced stricter lending criteria, which led to mortgage lenders having to take greater steps to check affordability – including on remortgages.

These rules require your lender to check you can afford your repayments, both now and in the future. To do this, they will need information about your income and outgoings. You will have to inform them if you expect your income and outgoings to change in a way that means you’ll have less to spend on your mortgage repayments. You will also need to provide your mortgage lender with evidence of your income.

Your Mortgage Costs

There are various factors which make up a mortgage beyond the actual mortgage cost you’ll pay each month. Its important to know the cost of all these before you agree to any mortgage offer.

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The cost of your mortgage is calculated by how much you are borrow, your mortgage term in years, and the rate of interest of your mortgage. Longer term mortgages such as 25 years tend to offer cheaper monthly payments, but you’ll end up paying more back over the 25 years. If you choose a shorter term, your monthly payments will be higher, but you’ll reduce the total amount of interest you pay back.

To work out how much your monthly mortgage payments will be, you’ll need to know how the mortgage loan amount, over how many years you want to pay it back and what interest rate you’ll be paying it at. You can use our monthly repayments mortgage calculator to give you a rough guide what the costs would be. Remember though, the monthly costs will change depending on which type of mortgage you want and if its fixed they will change when the deal comes to an end.

This depends on what interest rate your mortgage deal is and is only relevant to that mortgage offer. If its a tracker mortgage it can change monthly, if its a fixed rate mortgage you’ll usually move onto your lender’s standard variable rate (SVR) when it ends unless you remortgage to another fixed rate or another mortgage deal.

Remember to factor in other costs too, such as stamp duty if the property is over £250,000, removal costs such as packing materials, removal companies and conveyancing fees. There may also be an arrangement fee and a booking fee on the mortgage plus broker fees. Your advisor will tell you these when you book your call (which is no obligation and free)

Repayment Methods

The two most common ways of repaying your mortgage are capital repayment and interest only.

Capital Repayment

On a repayment mortgage, your monthly payments will partly go towards repaying the interest accrued on the money you’ve borrowed and partly towards repaying the capital sum (i.e. the amount you borrowed).

The benefit of capital repayment is that you’ll be able to see your outstanding mortgage reducing each year (albeit very slowly in the early years), and you are also guaranteed that your debt will be repaid at the end of the mortgage term, as long as you keep up your payments. On a capital repayment mortgage, the shorter the term you pay your mortgage over the bigger your monthly payments will be.

By having a longer term, you may benefit from a lower monthly payment, but you will also pay more interest to the lender over the mortgage term.

Capital repayment is the most common way of repaying your mortgage.

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Interest Only Mortgage

For an interest only mortgage, your monthly payments will only cover the interest on your mortgage balance. The capital you owe (i.e. the amount you borrowed) will not go down and you will need to repay this in full at the end of your mortgage term. This means you will need to make a separate investment or combination of investments to generate the capital required, and you will also need to prove that you can afford to do this.

You should bear in mind that the value of investments can go down as well as up and you may not get back the original amount invested. For an interest only mortgage, the lender will need to see your plan for repaying the loan when the interest only period ends. If you fail to generate enough to repay your mortgage by the end of the mortgage term, you may be forced to sell your property.

With an interest only mortgage, you must be able to demonstrate how you will repay the capital sum at the end of the term.

Costs Involved

It’s easy to underestimate the mortgage costs involved when buying a property.

Lenders may ask you to pay a valuation fee. The type of valuation you choose will depend on factors such as the age and condition of the property.

These are the costs your lender will charge you for arranging your mortgage. Some lenders will allow the fee to be added on to your mortgage, but this means you will be charged interest on it over the mortgage term.

The fees charged by a solicitor will include their conveyancing fee (i.e. for the transfer of land ownership), as well as charges for legal registrations and other miscellaneous costs (known as disbursements) such as local search fees and Land Registry fees. Some lenders may offer to finance some or all of your legal costs as an incentive.

If the amount you wish to borrow is greater than a specified proportion of the property’s value (typically 75%), you may incur a higher lending charge.

Lenders may charge an ERC if you make an overpayment in excess of any stated limit, if the loan is repaid early or if you remortgage during the early repayment period. This can amount to a significant cost, so you should always check the early repayment terms in the offer letter from your lender.

Lenders may charge a fee to release the deeds of a mortgaged property to you or a new lender.

Before we get started, we will explain how we will be paid for arranging your mortgage if it all.

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What else do you need to know?

Buying a property isn’t just about the right mortgage; it also involves solicitors, surveys and insurance. Before offering you a mortgage, your lender will instruct a survey to confirm the price you’re paying for the property is appropriate. The most common types of survey are:

Homebuyer’s Report
The report will include comments on the property’s defects and the valuer’s opinion as to its marketability
Basic Mortgage Valuation
This is for the lender’s own purposes to confirm the property provides security for the loan you have applied for.
Full Structural Survey
This report is the most comprehensive survey and is based on a detailed examination of the property you are buying.
Solicitors
You may need to appoint a solicitor or conveyancer to act on your behalf. They will undertake the legal work required to ensure the ownership (title) of the property and land transfers successfully. If you don’t already have a solicitor who undertakes conveyancing work, we can recommend one using a specialist company that provides access to a nationwide network of solicitors. Some lenders will offer to pay for the basic mortgage valuation as an incentive. You may also want to consider one of the more detailed surveys, depending on the age and condition of the property. In most cases you can use the same surveyor to carry out both surveys, but there’s nothing to stop you appointing an independent surveyor should you choose to do so. We can help you do this. Solicitors, valuers and surveyors are not regulated by the Financial Conduct Authority.

Working With You

With our mortgage advice we’ll help you put your plans into action.

Getting to know you
When you get in touch with us, we will want to learn more about you, your circumstances and your overall financial position. We’ll also want to hear your thoughts on which type of mortgage you believe is right for you, before walking you through the pros and cons of each option.
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What we must tell you
When you first speak to us, we have to tell you what our charges are and how they are to be paid. We also have to say if there are any limits to the range of mortgages we can recommend for you. Using our expert knowledge and database of 15,000 mortgages, we will find the deals that are most suitable for your needs.
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The right solution
Once we have identified the options available, we’ll meet with you again or discuss our recommendations over the phone. Assuming you’re happy with our recommendations, we’ll work with you to complete the application forms and liaise with your solicitor, valuers and surveyors on your behalf.
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MORTGAGE NOTICE

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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