If it is the first time that British people are trying to get on the property ladder, yes you need the backup of the mortgage. Being a newcomer, you are also unfamiliar with the rituals and rules of the mortgage industry. To make things happen smoothly and attain funds to buy the property in the UK, you need to know how things happen. A detailed and in-depth insight on mortgages can undoubtedly help you stay wise and avoid all the mistakes that may cause rejection.

Have a look at the guide for beginners below -

What Is a Mortgage?

A mortgage is a property loan that facilitates funds for the purchase of any property, whether it is residential or commercial. The purchased home or property is used as the collateral/security against the borrowed loan amount. If the loan holder fails to repay the mortgage, the lender has the right to take the possession of the property and sell it to get the money back.

What are the types of mortgages?

According to market trends, mortgages have different types in the UK. They are -

• Fixed-Rate - In fixed-rate mortgages, the rate of interest on your loan remains fixed, or you can say it doesn't change until a defined period gets over. The most significant benefit of this type of mortgage is that the borrower has a decided monthly instalment. It does not change with the volatile nature of the interest rates in the UK market.
• Variable Rate - As according to the term, variable rates keep changing according to the change of interest rates on mortgages in the industry. The borrower cannot predict anything. In addition, it is difficult to know the precise amount of monthly instalments. With the alterations in the rates of mortgage, the monthly instalments reduce or swell-up in size.
• Interest Only - The mortgage borrower pays only the interest in the name of instalments and the principal amount for that period is paid either through a lump sum amount or through monthly instalments.

Do you know how does a mortgage work?

Mortgage works in varied steps that can be explained well through the following points –

• Mortgage application - This is where the mortgage starts working.  With the necessary financial information, you can apply to the lender, and in a short while, the approval decision appears.
• The Hiring of a solicitor - Once you get the approval, you need to hire a solicitor who will take care of all the legalities involved in the property purchase. It is better to hire the one that is on the approved list of your lender.
• Property valuation - You can say that this is where the actual procedure of mortgage starts. The lender arranges an assessment of your property to know if its price is equal to the amount you have applied for or not.

It can be done in two ways, either through automated valuation AVM or by sending a registered valuer for the inspection of the property. The borrower pays the valuation fee.

• Get the mortgage offer

Once the valuation part is over, and the UK lender is satisfied, it gives you a mortgage offer The main elements of the offer are -

• Account fee information
• Tariff of mortgage charges
• terms and conditions
• Interest rate policy
• Repayment method

You have 7 days to go through the offer and decide if you want to accept or reject the offer.

Where to get a mortgage?

There can be no precise answer to this question, as different people use different platforms to get the mortgage. Some directly approach the lenders while some hire a broker to find the best suitable lender for their mortgage need. Both options have their pros and cons. You can choose the more convenient one, according to your financial conditions. However, it is a fact that for specific situations or issues in personal finances, it is better to hire a broker because such things can cause a rejection on the loan request.

If you are thinking about getting a mortgage with bad credit, broking company can tell you better which option is best for you. It has all the necessary information about all the available options in the market, which can save you time. There is no need to apply to too many lenders at the same time and experience a drastic drop in credit score. However, still, you have your choice if you think that referring to a lender directly is the better way, go for it.

How to know the repayments?

Your mortgage type tells a lot about the repayments. A fixed-rate mortgage gives a precise number on the monthly instalment for a specified period. Monthly compensations for variable-rate mortgages change now and then with alterations in the interest rates. In addition, the interest-only mortgages (as you know) ask you to pay only the interest amount for a short period and after that the principal as a lump sum or monthly instalment. Rest of the payments after that duration are decided according to the policy of the market. However, above all the best way to know your repayments is to calculate them rationally, and for that, you can easily rely on repayment calculator. It gives a 'near to perfect' figure of your monthly instalments. The advanced calculators equipped with artificial intelligence can facilitate precise calculations.

EndNote

To understand anything complicated, you need to get familiar just with the basics. There is no doubt that mortgage sounds like rocket science to a first-time applicant, but if there is an awareness of all the fundamental features, it is straightforward to cross the stages of the loan procedure.  One more thing is, stay disciplined in your finances. Healthier you are in your repayment capacity, better are the chances of approval. As a first-time mortgage applicant, you need to be secure in your financial ability, and that is not rocket science. Is it?