Whether you’re a first time buyer in Grimsby looking to step onto the property ladder or someone who’s moving, you’ll soon discover that there’s a diverse array of mortgage types available. Some are widely known and readily accessible, while others are more niche. To help you better understand the variety of mortgages at your disposal, we’ve compiled a list of the most common options offered by lenders. We’ve also created informative videos for each mortgage type to make them more comprehensible, as some can initially appear quite complex.
A fixed-rate mortgage is quite straightforward. With this type of mortgage, your monthly payments remain constant for a predetermined period that you agree upon with your lender. Typically, people opt for fixed-rate mortgages with durations of 2-5 years, but you can choose longer terms, such as 10 or even 15 years.
It’s essential to consider that long-term fixed-rate mortgages lock you into the same payments for an extended period, and significant changes can occur over 10 or 15 years. The economy and interest rates are unpredictable over such extended periods. To potentially save money in the long run, opting for a 2-year fixed-term mortgage and renewing it with a different rate every 2 years could be a more flexible and advantageous approach.
A tracker mortgage is where the interest rate closely mirrors the Bank of England’s base rate. Unlike fixed-rate mortgages, the lender doesn’t set the interest rate but ties it directly to the Bank of England’s rate. Your interest rate is usually expressed as a percentage above the Bank of England base rate. For instance, if the base rate is 1% and your tracker mortgage is set at 1% above the base rate, your effective interest rate would be 2%.
During periods of high Bank of England interest rates, lenders may be less inclined to offer tracker mortgages since they can result in higher interest payments for borrowers. Fixed-rate mortgages tend to be more popular in such circumstances because they provide stability and protection from rising interest rates. If you choose a tracker mortgage when the Bank of England rates are high, it may lead to higher mortgage payments over time, which might not be suitable for borrowers seeking predictability and affordability.
When you have a repayment mortgage, you’re making monthly payments that cover both the loan’s interest and principal. If you consistently make these payments throughout the mortgage term, you’ll ensure that the loan balance is fully paid off, and the property becomes entirely yours.
Repayment mortgages are the most secure way to repay the borrowed capital. In the early years, the majority of your payments go toward interest, causing the balance to decrease slowly, especially if you’ve chosen a longer-term mortgage, such as 25, 30, or 35 years. However, this pattern changes in the last decade of your mortgage, where your payments start to pay off more of the principal than interest, resulting in a quicker reduction of the remaining balance.
While many buy to let mortgages in Grimsby are commonly structured as interest-only, obtaining an interest-only residential property mortgage has become considerably more challenging. Lenders are now less inclined to offer interest-only products. However, there are specific situations in which this option may still be available.
Such situations include downsizing in later years or having alternative investments earmarked to repay the principal. Lenders have become much stricter in their criteria for offering these products, and the loan-to-value ratios are significantly lower than in the past.
An offset mortgage involves the setup of a linked savings account alongside your mortgage account by the lender. The concept is simple: if you have a mortgage balance of £100,000 and maintain £20,000 in your linked savings account, you only pay interest on the reduced amount, which is £80,000 in this scenario. This approach can be highly effective for managing your finances, particularly if you fall into a higher tax bracket.
Whether you are a first time buyer in Grimsby searching for a perfect home or current home-owner wanting to move house, we can help! You may be looking to remortgage, interested in buy to let mortgages, need help to buy advice or general mortgage advice in Grimsby. Guiding you through these situations is what we do best and it is our service to you as our consumers.
You may be entitled to be put onto the Right to Buy scheme If you have been residing in a council-owned property for an extensive period of time. The scheme enables you to buy the property at a discounted price and that is classed as your deposit. Thus allowing you to use your money on remaining fees.
If you wish to borrow money for home improvements for the property, you may be permitted by some lenders to do this, but you will need to gain permission from the local authority.
The Right to Buy scheme was very popular back in the 80’s and deemed helpful by many who used it but also appeared to be a controversial issue in regard to politics. One of the main reasons as to whether the Right to Buy should be active is that the scheme takes homes out of the public sector which doesn’t necessarily help when there is already a housing shortage. This has changed the dynamics of the council estates as more properties have become more privately owned. It would appear that current homeowners who are older were able to get onto the property ladder via Right to Buy.
In order to enrol for a Right to Buy Mortgage, you need to see if you’re eligible to purchase the property. You’ll need a RTB1 which will be the starting application form – from here your local authority will send out a person to figure out how much your property is worth and you will be told the value. After you have received a value figure, you will then be informed of the percentage discount which you’re entitled to and offer you the opportunity to proceed with the process.
You will have to complete a form that the local authority send to you should you wish to go forward with your application.
The procedure of calculating how much you’re able to borrow is the same as any other mortgage and is based on your income and expenditure, so even with a Right to Buy scheme it is still as important to think ahead. Another vital factor is to check your credit score.
As mentioned earlier, you will have to pay certain fees. These can include:
· Lender’s valuation fee (some Lenders do this for free, proving helpful to save on finances)
· Lender arrangement fee (Sometimes this isn’t necessary)
· Mortgage Broker’s Fee (An experienced Advisor will be able to support you through the process)
· Solicitor’s costs
The Right to Buy was set up on the premise of helping individuals getting on to the property ladder. Therefore, tenants are not permitted to sell a property for a certain period of time to prove they are using the scheme for the right incentive. If the property is sold within that period, a penalty will be issued. This will be expressed by repaying part of the original discount that was granted to you originally.
Some people refrain from applying for a Right to Buy because of certain responsibilities that are attached with owning a home. Certain factors include carrying out their own repairs and maintenance that entails. On the other hand, those that do wish to take up the offer of the discounts will be able to utilise the scheme to help them become Homeowners, whereas in alternative routes they may have trouble doing so.