What is a mortgage?

A mortgage is a loan that you can take out to fund your purchase of property or land. Buying property or land is often the biggest purchase you are going to make. If you are considering taking out a mortgage to make this acquisition it is important that you understand the process and make sure you can afford the mortgage repayments. You will usually need to have at least 5% of the purchase price to put down as a deposit, however the larger the deposit the better mortgage deals you are likely to be able to access.

You will also need to keep in mind the other costs involved in buying a property for example mortgage fees or stamp duty.

Types of Mortgage

There are various types of mortgages available to buyers. The most common repayment period is 25 years however, depending on the mortgage this can be a shorter or longer amount of time. Mortgages usually fall into two main categories:

Repayment Mortgage – With this mortgage, you will be making monthly payments that cover the mortgage interest and part of the amount borrowed. This type of mortgage gives you the opportunity to pay off the entirety of your mortgage and own your home outright by the end of the term.

Interest only Mortgage – Unlike the repayment mortgage, an interest only mortgage only requires you to make payments that cover the loan interest. These types of mortgage are less popular with lenders as the property owner is not paying off the loan itself

Within these categories, you may be able to choose from various types of mortgage deal, depending on what suits you best.

Fixed-rate Mortgage – This type of mortgage means your monthly mortgage repayments would stay the same for a set length of time, the most common period being two – five years.

Variable rate Mortgage – With this type of mortgage your monthly repayments will vary, as the amount of interest you will pay can go up or down, usually in-line with the Bank of England’s base rate. This mortgage type also includes tracker mortgages and discount mortgages.

Standard Variable Rate Mortgage – This mortgage type works in a similar fashion to the variable rate mortgage, however it is based on the lenders own standard variable rate which they set themselves.

How to get a Mortgage

If you are looking to take out a mortgage to buy a property, you can apply directly to the bank or building society you want to use or you can enlist the help of a mortgage broker or Independent Financial Adviser who will be able to provide professional advice, find the best deal for you and submit your application.

You may find there are some deals that you can only get by applying directly yourself, and others that only mortgage brokers can access.

There are many rules and regulations around mortgages and repayments, so it is recommended that you seek professional financial advice.

Your property may be repossessed if you do not keep up repayments on your mortgage. For Buy-to-Let a ‘receiver of rent’ may be appointed and / or your rental property may be repossessed.

The FCA does not regulate some forms of buy-to-let and commercial mortgages or taxation advice.

SPF may charge a fee for the services/advice provided; this fee will be dependent upon your personal circumstances and will be agreed with you after we have fully understood your requirements. They may also be paid commission by any related lender/insurer.

SPF Private Clients Limited is authorised and regulated by the Financial Conduct Authority (FCA), Financial Services Registration number 189213. The FCA is the independent watchdog that regulates financial services.

We routinely introduce our clients to SPF Private Clients Limited (SPF) for mortgage broking services. Should you decide to use the services of SPF, you should know that we expect to receive a referral fee from them of 25% of the aggregate of the fee paid to them by you for the arrangement of a mortgage and any fee received by them from the product provider.