Buying a property is one of the most important decisions you will make, whether its buying your first home, a subsequent upgrade or a rental property. We can help you every step of the way.

How does a mortgage work?

When you arrange a mortgage you are agreeing to borrow a certain amount of money from a lender to purchase a property. The lender will want to check that the property is worth what you believe it to be and that you can afford to repay what you have borrowed. Each month you will need to pay back an agreed amount of interest.

If the mortgage is on an Interest only basis then this is all you pay, however with a repayment basis mortgage, each payment pays an amount off the capital that was borrowed as well as interest. Interest only mortgages are used rarely now as lenders prefer to see part of the capital being paid back as well as interest as an interest only option is high risk, you still need to pay the capital back and the end of the mortgage term.

With a repayment mortgage, as long as you make the required payments each month, your mortgage will be repaid in full by the end of the term. In the early years you may only be repaying a very small amount, however each month more capital is repaid and less of the monthly payment goes towards interest. The longer you agree the term, the less capital you repay each month and the more interest you pay over the whole term.

How is a mortgage arranged?

When you have found your property you need to employ a solicitor or conveyancer who will do the legal work that is required, such as registering with The Land Registry and paying HMRC any Stamp Duty that is due. Once you have applied for the mortgage the lender will want to ensure that you can afford what they want to lend you, by looking at your payslips and bank statements. They will also want the property independently valued, to ensure that it is worth what you believe it to be. Once they are satisfied they will send you and your legal adviser a Mortgage Offer which will be the contract between you and them. Your legal adviser will then be able to complete the purchase.

What are the various types of mortgage deal available?

Mortgage lenders offer what is known as their Standard Variable Rate, this would be the interest rate that you would pay if you were not on a special deal. Various deals are available at any time, from a variety of different lenders, some are available direct to the public, but some are only available through an adviser.

• Fixed rate – the interest rate is fixed for a set amount of time, usually between 2 and 5 years. You can budget easily as you know exactly what you will be paying each month.
• Tracker rate – the initial interest rate is agreed, however this rate can increase or reduce. The changes will track something such as the Bank of England Base Rate, the rate at which the BoE lends to banks or another indices, such as LIBOR (London Inter Bank Offered Rate) the average rate at which banks lends to each other. If the indices rise by 0.25% then your interest payments each month rise by 0.25%.
• Discounted variable rate – the initial interest rate is agreed, however this rate can increase or reduce. The changes will track the lenders Standard Variable Rate (SVR), if the SVR rises by 0.25% then your interest payments each month rise by 0.25%.
• Capped rate – The rate will be variable, however it will be guaranteed not to rise above a certain ‘cap’ during the term of the deal

The special rates, the deals, are usually available for between 2 and 5 years, however in the past Tracker rates were available for the term of the mortgage. Most lenders will charge you a fee for the deal, some charging a higher fee for a lower interest rate on a similar deal. You need to determine what type of deal that you want, fixed or variable, and then what is the best value deal for you. In some circumstances it maybe worth paying a higher fee to get a better interest rate. This is something your Base Financial adviser will do for you, determine the best deal for your individual circumstances.

Remortgaging?

When you come to the end of your mortgage deal, rather than paying the lender’s SVR most borrowers would want to consider another deal, to keep their payments to a minimum. Lenders like existing borrowers, as they have some track record of paying a mortgage. To entice you to move your mortgage from your existing lender to themselves most will offer to pay for some of the services that you would normally have to pay for. It is not unusual to find lenders paying for a standard valuation of the property or paying the costs if you use their solicitors for the legal work.

Conveyancing

Conveyancing is the legal transfer of a property from one owner to another. The process involves a conveyancing solicitor or licensed conveyancer who acts on behalf of the buyer to ensure their client receives the title deeds to the property and the land it sits on.