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How does a mortgage work?

A bank or lender makes an interest-bearing loan. In exchange, their loan is secured by the value of the borrower’s property. The loan agreement’s terms are recorded against the property’s title; this is known as a mortgage.

What is a mortgage broker?

Mortgage brokers are specialist mortgage advisors who will look for a suitable mortgage product on a client’s behalf to ensure they get the right deal for there circumstances. Fees and success rates vary from one broker to the next, so it is sensible to research the broker firm you plan to use, Google reviews could be one area to help understand other client’s experiences.

What different types of mortgages are there?

There are two main types of mortgages: fixed rate mortgages and variable rate mortgages. There is also other options such as capped and discount.

A Fixed Rate Mortgage means that your interest amount is fixed for a period of time (usually two to five years), so your repayments don’t change.

A variable rate mortgage means the amount of interest you pay can change, and therefore so do your repayments.

How much deposit do I need for a mortgage?

You will need a minimum of 5% deposit. The more deposit you put in, the better the interest rates will be. For example, if you put in 15% deposit this will get you a better interest rate than a 10% deposit.

For BTL you will need at least a 15-20% deposit, better interest rates are available with a deposit of 25% or more.

How long should I take my mortgage out for?

The answer to this is simply down to what you can afford. We would always advise speaking to mortgage adviser to ascertain what term is suitable to your circumstances.

How much can I afford?

There is no prescribed criteria to determine what you can borrow. The amount you qualify for will be determined by the purchase price of the property, the deposit you are able to put down, and your income and monthly expenses. Refer to our Mortgage Calculator for a guide. Alternatively, our advisers can give you an indication over the phone or a full agreement in principle.

What is LTV?

Lenders frequently discuss the LTV requirement. “LTV” stands for “Loan to Value.” This is a term used to describe the loan-to-value ratio of a property purchased. For example, if you borrow £170,000 to buy a property worth £200,000, the LTV is 170,000/200,000, or 85%. The remaining 15% is your equity.

What is conveyancing?

Conveyancing refers to the legal work completed by the solicitor or conveyancer you choose when buying or selling a property. It is important to have either a conveyancer or a solicitor already lined up because as a buyer or a seller, you will need this in place to start and complete your transaction. 3mc can help with your selection should you require some assistance.

What other costs are there when buying a property?

There are various costs associated with buying a property, which we have detailed below.

  1. Stamp Duty Land Tax (SDLT): Currently, first-time buyers are not required to pay SDLT. Current percentages payable can be found at https://www.gov.uk/stamp-duty-land-tax.
  2. Solicitor’s fees: These are based on the purchase price. Typically, first-time buyers will pay £500-£1000.
  3. For most lenders, these are also based on the purchase price. Many lenders offer free valuations, especially for first-time buyers and remortgages.
  4. Lender arrangement fees: These can usually be either added to the mortgage or paid up front and average approximately £999.00.
  5. Mortgage broker fees: We charge competitive broker fees to our clients. Existing clients get a significant reduction.

Can I pay my mortgage off early?

Yes, but you could have early repayment charges to pay if you have only had your mortgage product for a short amount of time.

Can I make overpayments on my mortgage to pay it off sooner?

Yes, most lenders allow up to 10% of the mortgage balance to be overpaid each year without incurring any penalties.

What is a Buy-to-Let mortgage?

A Buy-to-Let mortgage is where you buy another property specifically as an investment with the intention of letting it out.

I would like to invest in a rental property. Is this something you can help with?

Yes, our advisers have a wealth of experience in a range of mortgage types, including the increasingly popular buy-to-let mortgage.

Can you get a mortgage with a part-time job?

Lenders in general are more interested in your total income and financial status than the number of hours you work. After all, it is perfectly possible for a part-time worker in a lucrative position to earn more than an entry-level full-time worker. Provided you have enough proof of income, your part-time employment status should not be an issue.

How many months' payslips do I need for a mortgage?

This varies significantly amongst lenders and is also determined by the length of your employment. Some lenders will accept just one month’s pay slip, whereas others may require proof of income for a full year or longer.

Can I have two residential mortgages?

Yes but there could be more restrictions on the number of residential mortgages you can have. Provided you can prove the income required to pay the first and subsequent monthly payments, certain lenders will allow finance for the purchase of additional homes for personal use, such as a holiday home, weekend residence, etc.

Can you rent to a family member under a buy-to-let mortgage?

Some lenders offer a specialist ‘family buy to let mortgage’ that enables landlords to let properties to family members provided the rent adequately covers the monthly mortgage payments.

How long do payday loans stay on your credit report?

Payday loans can have an negative effect on your eligibility for mortgages, loans, credit cards, and so on. Unfortunately, any record of payday loans on your credit report will be visible for at least six years. Nevertheless, the longer the period between your last payday loan and your current application, the less likely it is to affect your eligibility.