How to Choose your UK Mortgage.txt by BannavtiEric


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This quick guide shows you potential mortgage choices for each type of borrower. Please note
that this is a general guide and we should stress that you are always better off talking to a
specialist mortgage adviser


One thing that applies to almost all types of mortgage is the choice of a fixed rate mortgage or one
with a variable interest rate.

The best choice depends on your own circumstances and to an extent on interest rate levels at the
time, but things to consider are:

* Can you afford to have your payments go up each month? This could happen with a variable rate

* Are rates generally low at the moment? It could be a good time to get tied into a fixed rate

* Do you want the security of a fixed monthly payment for several years? Fixed rate periods from 1
to 10 years are available.

* Are you having difficulty borrowing enough money? An interest only mortgage can mean lower
monthly repayments ie you can borrow more against your salary. But there are drawbacks.

To understand which option will suit your circumstances, discuss your options with a UK mortgage
specialist, who will advise you on suitable choices.

Here are some specific tips depending on your particular mortgage needs

First Time Buyers

As a first time buyer, you are likely to have some particular requirements. You will probably have a
very small deposit or possibly no deposit at all. You may be having to push your budget to the limit
just to afford a mortgage, but are determined to get a foot on the property ladder.

There are several suitable solutions:

· 100% mortgages to many lenders offer 100% mortgages aimed at first time buyers.
These are normally repayment mortgages and can be a good option to get you started.
· If you have a deposit, but can't afford large monthly payments, an option to consider
might be an interest-only mortgage, where your monthly payments only consist of interest, and
you don't make any payment towards the capital sum.

· Choose a mortgage term longer than 25 years to it may seem daunting but many lenders
will offer mortgages with terms up to 40 years.

Any of these choices can be a good way to get started in home ownership, with a view to moving
to a better deal in 2-5 years time when you have some equity in your property and are perhaps
able to afford larger monthly payments. Remember, very few people stick with the same mortgage
for 25 years anymore. It is normal to change mortgages for a new deal every 2-5 years.

Self-Employed Mortgages

Getting a mortgage for self-employed people has always been a bit more of a challenge. Even if
your business is well established, it can be hard to prove your income and since mortgage lenders
assess your ability to pay based on net income, you could find that they underestimate your
borrowing ability.

So what are the choices?

· Self-Certified Mortgages. It is not necessary to provide audited accounts and to prove
your income, although you will still be required to provide some evidence that you can afford the
monthly payments.

· If your business is well-established, and you can provide 3 years or more of audited
accounts, showing a stable income, you should not have too many problems. Lenders are more
flexible than they once were.

As with other specialist mortgages, it can be worth getting the advice of an Independent Financial
Adviser to make sure you get the best deal for you.

Already a Homeowner?

If you are already a homeowner (with or without a mortgage) then you might want to release some
equity from your home to give you a cash lump sum.

This means that if you have paid off a significant amount of your mortgage and/or property prices
have risen, you can benefit from some of the "profit" that is locked into your house without having
to sell the house.

Lenders provide a variety of packages for doing this, but they are generally described as "equity
release" mortgages.

Typically you will be able to borrow up to 95% of the equity in your home, given to you in a lump
sum which you then pay back like a normal mortgage. This can be used to pay for home
improvements, lifestyle changes, home repairs to almost anything, really.
Get a Better Mortgage Deal

Don't forget that just because you have a mortgage, it doesn't mean that you can't get a better one
that will cost you less, or alternatively a mortgage with a shorter term so that you can pay it off

Hunt around to whether you want to find a more competitive interest rate, a long-term fixed rate
deal or you want to increase or decrease the remaining duration of your mortgage to you will
probably find a lender who is able to offer just what you want, and could save you a significant
amount every year.

Discussing your requirements with an IFA can often help uncover the best mortgages, which
sometimes come from quite minor building societies.

Big Bonuses, But a Low Basic Salary?

If this is you, then you might find it difficult to get a repayment mortgage that meets your
requirements. This is because bonuses and overtime are hard to predict, not guaranteed and are
normally excluded from your assessed income by mortgage lenders. This means you could end up
being offered a much smaller mortgage than you think you can afford.

The solution to this could be a flexible mortgage. A relative of the interest-only mortgage, flexible
mortgages have monthly payments which are interest-only, but allow you to make ad-hoc
repayments towards reducing the capital sum.

For example, if you get a quarterly bonus, every 3 months you could make a payment towards
reducing the capital sum of your mortgage, whilst paying smaller, interest-only payments each
month [from your salary].

Flexible mortgages like these can be helpful for anyone with an unevenly distributed income who
receives occasional large payments, rather than solely receiving salaried income.

Are You An Expatriate?

As an expatriate, your mortgage needs are a little different. Buying property abroad is difficult with
a UK mortgage, although there are some high street lenders that have affiliated with foreign
lenders, particularly in Spain, to provide easy access to mortgages in some other countries.

On the other hand, many expatriates look to buy a property in the UK in preparation for their
eventual return. This is more straightforward and there are several big lenders who can assist with

The best approach is probably to find an IFA who has experience of setting up this kind of
mortgage and see what they can offer you. There may be some complications but it should
certainly be possible.
Buying To Let?

Buying to let has become very popular in recent years. Whether you count yourself a professional
landlord or are just looking to buy a second property to rent out as an investment, buy to let
mortgages are fairly mainstream now and as such are quite widely accessible.

You may notice some differences to residential mortgages:

· Can only borrow up to around 75% of property value

· Mortgage terms may not be extendable beyond 25 years, often less still for interest-only

As with all mortgages, you will have to undergo a credit check and will have to provide some
evidence that the property you are buying is a suitable business proposition to i.e. you can rent it
for a suitable amount and/or can make the payments yourself if needed.

Want To Let Out Your Home Temporarily?

There are times when homeowners want to let their home on a temporary basis to perhaps they
are moving abroad for a year or two, or elsewhere in the UK, but want to maintain their main home
and rent it out to cover the costs of the mortgage.

Most residential mortgages will allow you to do this to exact terms and conditions will very from
lender to lender, but as long as you tell your lender you want to let, you will probably find they are
happy for you to do so.

Are you a Muslim, Looking for a Sharia-Compliant Mortgage?

Islamic mortgages used to be almost impossible to obtain in the UK, but in the last 5 years, the
number of lenders offering mortgages that comply with Sharia law has grown considerably. It is
now possible to get an Islamic mortgage for your house from several high street lenders with no
more difficulty than a regular mortgage.

Islamic mortgages available in the UK fall into two main categories. By far the most popular are
mortgages based on the Ijara principle. Also available are mortgages based on the Murabaha
principle but these tend not to be affordable to most borrowers, especially younger people just
starting out.

Getting Divorced, Need Two Mortgages?

Getting divorced can be a difficult and traumatic experience, often not least because of the
financial complications. These can cause people with previously exemplary financial records to get
into problems, and can sometimes make it difficult for the divorced individuals to get mortgages.

A few lenders now offer mortgages aimed specifically at the needs of the newly-divorced, with a
number of features designed to help people back onto their feet, financially:

· Fixed interest rate for up to 5 years

· First few months at 0% interest

· The lender will include maintenance payments (alimony) in their assessment of your
income when determining the amount that can be borrowed.

· Can borrow 100% of property value if needed

· Choice of repayment or interest-only mortgage

There are not many of these packages around (Yorkshire Building Society offers one example),
but they can really help divorced people through the difficult process of finding a new home and
re-establishing their financial situation.

This article is written by MortgageSorter, a UK mortgages website that has been helping normal
people understand []UK mortgages for over 5 years. It has a special section on UK []Mortgages for
people with a bad credit history and has the []latest best buy UK mortgages.

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