How much can I borrow?
Lenders, across the board, have various income multipliers that range from 3 times annual salary up to 5 times for a single applicant. For joint applications lenders will apply the same rule for the first applicant plus 1 times the second applicant’s income or alternatively, up to 4.6 times joint income. Some lenders adopt an affordability calculation which often means the above multiples can be stretched.

Higher Lending Charge
When borrowing more than 70% of the purchase price some lenders may charge an additional security fee which may be added to the loan on completion. This fee purchases an indemnity contract which goes some way towards protecting the lender in the event of repossession. It is important that know that this form of contract does not provide any benefit to you and you will still remain liable, whether to the lender or the insurer who pays the lenders’ claim, for all sums owing,
including arrears, interest and legal charges.

Ways to Repay your Mortgage

Repayment
With a repayment mortgage your monthly mortgage payment includes an element of capital, so that, month by month, the amount you owe is gradually reduced. By the end of the mortgage term the balance will be zero provided all due payments have been made.

Interest Only
Each month you pay interest only so that the amount you owe remains constant throughout the mortgage term. Thus, it is vitally important to make arrangements to ensure that you can repay the mortgage loan at the end of the term. To do this many people invest in an endowment policy or other investment vehicle which is designed to provide a lump sum at the end of the term to pay off the mortgage. In respect of this Paul Fenton Homebuyer Services is an Introducer Representative of MGM Assurance, which are authorised and regulated by the Financial Services Authority.

Early Repayment Charges
Under certain circumstances some lenders will require an Early Redemption Charge to be paid if the mortgage is redeemed before the end of a selected period of time. This may be for the discounted or fixed rate period and the charge can vary for different lenders and for different schemes with the same lender.

The Different Interest Rates

Standard Variable (SVR)
Lenders have the right to vary the rate in relation to funding costs and competition in the market place.

Fixed Rates
The interest rate charged is fixed for a given period of time, when it will usually revert to the SVR.

Capped Rates
The lender will guarantee that your interest rate will not rise above a set interest rate for a given period, however, if interest rates fall you May benefit from a reduction in the rate.

Discounted Rates
Some lenders offer ‘discounts’ off the SVR for an agreed period, after which the rate reverts to the SVR.

Tracker Rates
These are interest rates that track the Bank Base Rate (BBR). Lenders may also offer discounts to their normal tracker rate.

Flexible Mortgages
A flexible mortgage allows the payment of additional or lump sum payments in excess of the required amount, enabling you to pay off the mortgage earlier. Any overpayments may be ‘borrowed back’ at any time or used to take a ‘payment holiday’.

Offset Mortgages
An increasing number of lenders are offering ‘offset’ mortgages where the borrower has a facility to offset monies held in a current account and/or savings account against the mortgage loan on a daily basis. Interest savings are made, by calculating the amount of interest due, on the net balance. The borrower can choose to vary the monthly payment or reduce the term of the mortgage.