Getting a Mortgage - All you need to know
On the lookout for brand new home? Before you buy, you’ll need to know what type of mortgage you can get and how much you can afford. Navigating the mortgage market can be tricky, so we’ve put together this simple guide to help you get started. We’ll explore how mortgages work, how much you might be able to borrow and take a look at the different types of mortgage available.
Please note: Miller Homes cannot advise you on a mortgage, you should always speak to an independent Mortgage Adviser to find out the options available to you.
What we’ll cover:
What is a mortgage?
How much can I borrow?
How do I get a mortgage?
What are the different types of mortgages?
Fixed-rate mortgage
Tracker-rate mortgage
Interest-only mortgage
Capped-rate mortgage
Cashback mortgage
Offset mortgage
What is a mortgage?
A mortgage is a loan from a bank or building society that allows you to buy your home over a fixed term, such as 25 years. Once you pay off your mortgage, you will be the outright owner of your home.
How much can I borrow?
The first step is to work out how much you have for a deposit, and what you could afford to pay each month based on your income and regular outgoings.
Your monthly payments will be determined by the price of your property, interest rates, and the duration of the mortgage. An easy way to find out how much your monthly repayments might be is to use our free mortgage calculator .
Your deposit is usually at least around 5 to 10% of the property price. So, if your deposit is 5%, and your property price is £200,000, the minimum you would have to pay upfront is £10,000. You can choose to pay a higher deposit, which will bring down the cost of your monthly repayments.
At Miller Homes, we offer a Deposit Paid Scheme on selected plots and developments, where we could pay up to 5% of the purchase price as your deposit. We also offer a Deposit Match Scheme, where we could match your saved deposit up to 5% of your property price.
How do I get a mortgage?
First, contact a lender to get a mortgage in principle so you can see whether you’ll be accepted and how much you could borrow.
Once you’ve found your new home, you will need to secure the mortgage with your lender, who will ask about your finances, employment and income history. They will ask for documents including proof of income, address history, your solicitor’s contact details and information on the property you want to purchase. The lender will also carry out a credit check.
At Miller Homes, we can put you in contact with mortgage advisers who will give you free guidance and help you find the mortgage best suited to you. Mortgage advisors are financial professionals who provide impartial mortgage advice and help with your application and documents to ensure your mortgage application is smooth and stress-free.
What are the different types of mortgages?
There are many mortgage products to choose from, but which one is best for you?
Fixed-rate mortgage
On a fixed rate mortgage, you pay a fixed monthly instalment for the duration of the deal – which could be anything between one and 10 years. Your payment rate stays the same regardless of changing interest rates.
After your fixed-rate period, your mortgage will normally transfer to a standard variable rate (SVR), unless you move to another fixed deal. Homeowners often prefer a fixed-rate deal because of the certainty it provides. On a SVR, repayment amounts can go up or down, in line with changes to interest rates.
Tracker-rate mortgage
A tracker-rate mortgage means the interest on your repayments increases and decreases according to the Bank of England’s base rate. It’s normally for a specified period, which can be between two to 10 years.
Interest-only mortgage
With this product, you only pay the interest instead of the loan itself. This lasts for as long as the deal, and afterwards, you’ll need to pay off the full amount or remortgage. This type of mortgage is commonly used by buy to let landlords because the monthly payments are lower.
Capped-rate mortgage
A capped-rate mortgage offers you protection against increasing interest rates, because you set a limit on the rate. You still get the flexibility of a variable rate mortgage and your repayments can be based on the market, but the cap stops you from paying above a certain limit.
Cashback mortgage
A cashback mortgage can be a great option if you are looking to get some spending money for your new home. The mortgage lender will pay you a sum of money when you buy your new home, or when you begin your mortgage payments.
Offset mortgage
An offset mortgage combines your savings account with your mortgage. So, depending on how much you have in your savings, your interest rate will reflect it. For example, if your mortgage is £200,000 and you have £50,000 in your savings, you will only pay interest on £150,000 of your mortgage.
Whatever you decide, mortgages are a long term commitment, so getting financial advice from an expert is essential when taking out a mortgage, to ensure that you understand your options, can make informed decisions and simplify the buying process.
To find out more, click here.