Buying a home is something to look forward to, especially if you’re a first-time buyer. Your mortgage may be the biggest financial commitment you have, so it’s important to know how they work and what to expect.
Here at the Marsden, we’ve been helping people to own their own homes since 1860! As Lancashire’s largest building society, we’re here to support you now, and in the future.
What is a mortgage?
A mortgage is a large loan which allows you to buy a property. These loans typically run for a period of 25 years, although the duration could be shorter or longer depending on your circumstances and how much you borrow.
A mortgage loan can be taken out with a bank or building society and will be secured against the value of your property until it’s paid off. You will be expected to pay back the amount you have borrowed, plus interest, over the mortgage period.
Assessing your affordability
Before taking out a mortgage, it’s important to work out whether you’ll be able to afford the regular payments.
A lender will usually conduct an assessment of your financial status before you can take out a mortgage to make sure you are able to afford the monthly payments, and they’ll stress this to different scenarios. This is called an application in principle (AIP) or decision in principle (DIP).
When it comes to products, most lenders will offer both fixed-rate mortgages and variable-rate mortgages.
The repayments on a fixed-rate mortgage will be the same for a certain period of time; regardless of inflation rates. The interest rate can vary with a variable-rate mortgage, going up or down depending on the market. Lenders who offer an advised mortgage service will recommend the best product based on your circumstances.
Find out how much you could borrow and work out what your monthly mortgage payments could be with our mortgage calculator.
LTV and deposits
If you’ve researched mortgages before, you may be familiar with the term ‘Loan to Value’ or LTV for short. The LTV of a product indicates the amount a lender is willing to lend against the property price.
You will be required to contribute a deposit towards your property, however, the size of the deposit required can vary depending on the lender, the mortgage product you choose and whether you have a large deposit or a small deposit. The minimum deposit is usually 5%.
Choosing a mortgage
There are different types of mortgages to choose from depending on your circumstances, so it’s important to do your research and pick one that suits your needs. You may also be given the option to pay back a mortgage via interest only, or repayment.
Repayment mortgages mean you pay back the borrowed money and the interest each month, up to the point your mortgage term ends, or earlier if you increase your payments (for example, if you take out a 25-year term, you will have paid off all the money you owe, along with the interest by the end of the term). As the name suggests, an interest only mortgage means you’ll only pay the interest on the loan. You will need a plan in place for how you will pay the loan back at the end of the mortgage term, this could be from the sale of the property for example.
How can the Marsden help?
If you’re looking to purchase a home or remortgage, we could help. With over 160 years’ experience and a contact centre to assist with your enquires; we’ll recommend the product that’s right for you.
You can find out more and view our current mortgage range on our dedicated ‘Mortgages’ page.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.