There is so much to take in when it comes to mortgages: paperwork, interest rates, stamp duty… the list goes on. We think we’ve covered a lot of the important mortgage information in our thorough Mortgage Guides, but there are some areas we haven’t had a chance to address. That’s why we’ve written this blog – we want to list some of the helpful and interesting mortgage facts that don’t get talked about much. Read on to discover some valuable, lesser-known mortgage facts, but also a few that are just as interesting, but aren’t necessarily helpful!
You don’t need a huge deposit: A deposit is required when getting a mortgage that works out as a percentage value of the house. The condition of a mortgage is that you pay for at least of a portion of the property and then the lender covers the rest. Since properties cost hundreds of thousands of pounds, it seems like you’ll need a large cash sum. If you were to get a loan at 80% Loan-to-Value (i.e. you pay 20% of the property value as a deposit) on a property costing £250,000, then your deposit would be £50,000. That’s enough for several years of rent!
Luckily, deposits can now go down as low as 5% and even at this level rates are still competitive. There is also the government Help to Buy scheme which helps buyers of a New Build property with a 20% Government Loan on top of your 5% deposit. This means you need a lower mortgage which means a better rate!
In other words, mortgages are more affordable than ever.
The lowest mortgage rate isn’t always the best value: Have you made all the necessary calculations and deciphered the overall cost of your mortgage? Loans with the lowest rate can appear more attractive, but low rates are often those with the highest fees and end up being more expensive in total. You need to consider the deal you’re getting: how long does it last before you move on to the reversion rate? Are you planning a remortgage to take advantage of a new deal? We expanded on working out how much your mortgage will cost in a mortgage guide – you can read more about it here. Alternatively, you can try out one of our mortgage calculators to get an instant estimate.
Your mortgage rate is not definite: The lowest rates you’ll find may well be on variable rate Mortgages and it is important to take into account the Annual Percentage Rate (APR) which can change along with the Bank of England base rate or the lenders own variable rate. If you’re signing up for a variable rate mortgage, you should consider speaking with a professional about their predictions regarding future interest rates and to make sure you will be able to afford the mortgage in the event of an interest rate hike.
The alternative is a fixed-rate mortgage, the rate for which is – as the name suggests – fixed. These can ensure more predictable mortgage payments but tend to be slightly higher than variable.
The best day to list your home: If you’re looking for that extra advantage when selling your house, the best day to list your home has officially been decided. Studies have shown that thanks to people being happier about the upcoming weekend, Friday is the best day of the week to put your house up for sale. People are, on average, 20% happier on a Friday and with a weekend to follow there should be lots of time for people to come view the property.
Your credit rating doesn’t necessarily affect your mortgage deal: It’s a common misconception that a lower credit score will automatically make a mortgage more expensive. This isn’t necessarily true, although that isn’t to say credit rating isn’t a vital aspect of a mortgage. Credit ratings will play a significant part in whether or not you get approved for a mortgage, but once you are, the deals available are usually the same as those who were approved with a stellar credit rating, unless there is a history of missed payments on a loan or credit card. If you choose to remortgage with the same lender, they will usually use LTV% as the primary consideration.
Mortgage and taxes: The word ‘mortgage’ comes from the French word meaning ‘death contract’, arguably originating from early Anglo-Norman law where property was pledged as security for a loan. Despite its morbid translation, essentially all it meant was that borrowers were bound by debt until they had repaid the debt or they died. Thankfully, the latter was quite rare and debts were usually paid off.
People celebrate paying off their mortgage: In Scotland, there is a tradition where people paint their front door red, incongruous or not, when they have paid off their mortgage. Similarly, there is an American custom of burning your now redundant mortgage agreement at a party with family and friends.
Housewarming was literal: Once upon a time, when someone bought a house, the neighbours would join them for a housewarming. Rather than prosecco and dip, however, people would bring wood and light fires in all the fireplaces. It would warm the house, yes, but it was also used to ward off spirits that apparently liked to hang out in unoccupied houses.
Foreclosures do us part: Thanks to the US mortgage crash, 2009 saw more foreclosures than it did marriages.
If you have any more questions or are looking for some mortgage advise, Coreco have the experience and expertise to help. Get in touch via our contact page!