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finance: Mortgages

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Mortgages

Most of us depend on getting a home loan or mortgage from a bank or building society to purchase a home. The borrowing process is not straightforward, you have to convince a bank or building society that you are a good risk and that you have the financial means to make payments up to maturity.

You must have a good credit rating, have a job and be of an age which ensures that you will complete repayments. Existing clients of the lender with a good financial track record will be more likely to get a mortgage at good terms without difficulty.

The mortgage lending rate will depend on whether you are, a first time buyer, a landlord looking for a buy-to-let mortgage, your credit rating and age. A bad credit rating will probably disqualify an applicant from a loan or at least will seriously affect the lending rate. To pre-empt a loan refusal or a high rate, the applicant should improve the credit rating before applying for a mortgage.

Lending rates are either fixed or variable. Currently, in the present global financial climate, fixed rate mortgages are still available as an inducement but for a limited term only, on expiry the rates are re set often to a higher percentage. Variable rates have for the past few years been very low as they have tracked the extremely low Bank of England rate. Variable rates are now on the increase.

Read More Below

Company Interest Rate Initial Rate Maximum LTV
Nationwide (Flex 2 Year 1.99% Fixed) 3.99% 1.99% 70.00%
HSBC (2 Year 1.49% Fixed Special) 3.94% 1.49% 60.00%
TSB (2 Year 2.09% Fixed >200k) 3.99% 2.09% 75.00%
Virgin Money (2 Year 2.14% Fixed) 4.79% 2.14% 70.00%

The amount of the loan used to be 100% or very close to it. These attractive loans are a thing of the past. Down payments, to reduce the amount you need to borrow, are a good way of reducing the total cost of a mortgage. Lenders are more likely to offer you a lower interest rate as the risk to the lender is reduced.

Whether you will be eligible for a lower down payment or not should not deter you from making an application. The amount you pay as a down payment is a big factor in most mortgages, whether it is on the basis of APR or repayment amounts. If you have money saved it may well be the best option to use it to provide for a larger down payment and a lower interest on the balance.

If at some time during the life of your mortgage, you face a financial crisis which makes it difficult to make your mortgage payments for a period, you may be able to negotiate a stay of payments with the lender based on the equity in your home. Your insurance may provide for this eventuality.