Moving house is stressful enough, and getting a mortgage in place can feel really daunting. With so many different products and rates available, it’s hard to know where to start.
Taking a mortgage out is a big step and has long-lasting financial implications. The last thing you want to do is enter into one without being fully informed and knowing all the facts. To help clear things up, we’ve picked 10 of the most frequently asked questions we receive about mortgages, and we’ve answered each one of them for you. – Updated for 2019.
- What is a fixed-rate mortgage?
- What is a variable-rate mortgage?
- What type of debt is a mortgage?
- How much deposit will I need for my mortgage?
- What should I do if I can’t afford my mortgage payments?
- When will the interest rates on my mortgage go up?
- Can I get a mortgage with a poor credit rating?
- How long will it take me to get a mortgage?
- If my income goes up, can I pay my mortgage off more quickly?
- What happens when I’ve finished paying my mortgage off?
1. What is a fixed-rate mortgage?
Fixed-rate mortgages are one of the most popular mortgage types on the market. With a fixed-rate mortgage the payment stays the same for the term of the rate, which will usually be between 2-5 years. At the end of the fixed term the rate usually reverts to a standard variable rate for the remainder of the mortgage – unless you switch product.
The main appeal of fixed-rate mortgages is that you’ll have the peace of mind you won’t pay anymore than what you agreed throughout your whole fixed term period – so you’ll know exactly what you’ll be paying each month. The downside is that fixed-rate mortgages tend to involve slightly higher monthly payments than variable ones, plus you won’t benefit if interest rates fall.
2. What is a variable-rate mortgage?
If you decide to opt for a variable-rate mortgage, you need to be aware that the interest rate on it can change at any time, affecting your repayment amount. If the interest rate lowers you’ll be paying less on your mortgage, but if it increases you’ll end up paying more. It’s a good idea to have funds available to accommodate a potential rise in interest rates, if you decide variable-rate is the way you want to go.
3. What type of debt is a mortgage?
A mortgage is classed as a secured debt, because the money you’ve borrowed is secured against the home you’re buying. If you fail to keep up with your repayments, your home could be repossessed.
4. How much deposit will I need for my mortgage?
This can vary depending on factors like your credit score, the lender you opt to borrow from and how much you’re looking to borrow. Generally speaking, however, you’ll need to put down at least 5% of the property’s value to secure the mortgage.
5. What should I do if I can’t afford my mortgage payments?
If you can’t afford to make your mortgage payments you need to contact your mortgage provider immediately. Burying your head in the sand and missing payments is the worst thing you can do – repeatedly missing payments can not only have a negative impact on your credit rating, but also potentially result in your home being repossessed.
6. When will the interest rates on my mortgage go up?
This is dependent on the type of mortgage. With a fixed-rate mortgage, your payments won’t change until the end of the term, at which point they could go up or down, dependant on the rate at that time.
With a variable-rate mortgage, the payments could go up or down at any time.
7. Can I get a mortgage with a poor credit rating?
If you’ve been in debt before or entered into a debt solution, you might’ve heard you won’t be able to get a mortgage until you’ve improved your credit rating, but this might not be the case. Bad credit mortgages (also known as sub-prime mortgages or adverse credit mortgages) are available for people who’ve had some financial problems and have blemishes on their credit report.
We specialise in mortgage advice for people with less than ideal credit ratings so you could get the mortgage you need now, rather than having to wait for years. What’s more, after you’ve repaid your bad credit mortgage for a few years, your credit score should have improved, meaning you could remortgage to a standard lender with different interest rates if you wish.
8. How long will it take me to get a mortgage?
This varies depending on your situation, but generally speaking it’ll take between one and two months for a typical mortgage to be processed. This is after you’ve spent time browsing the mortgage market and weighing up the options to decide what mortgage you want to go for. Remember, entering into a mortgage is a huge decision, and you shouldn’t rush into it – make sure you’ve given yourself ample time to compare mortgages from a range of suppliers before you pick one.
9. If my income goes up, can I pay my mortgage off more quickly?
You can – but you should be sure that you can afford to do so before you consider it. As long as you’ve got enough excess cash in reserve for things like emergencies or unseen costs, paying your mortgage off early can be very beneficial. Not only does it mean you’ll have paid your mortgage off early, it also means that you could also pay less in interest due to making a lump sum payment. Just bear in mind there could be an early repayment charge though, so make sure you check with your lender first.
10. What happens when I’ve finished paying my mortgage off?
You’ll have paid off all the debt secured against your home, and your mortgage lender will remove any charges against your property they have on their system.