Welcome to Mortages UK at www.mortgagesuk.eu. Choosing a mortgage will probably be one of the most important financial decisions you make in your life, so we hope to bring you a useful resource that provides background information about mortgages so that you can make your mortgage decision.
Currently, our most useful pages are:
The House Buying Process Types of UK Mortgage Available The Conveyancing Process
Mortgage FAQ
APR (Annual Percentage Rate)
The APR is used to compare rates on different mortgages. It includes all costs associated with the loan, e.g. fees and insurance. The idea behind the APR is that it shows the true cost of borrowing over the entire mortgage term.
How is Mortgage Interest Calculated?
Before agreeing to a mortgage you should establish how interest will be calculated and charged to you.
On some mortgages interest is calculated daily. This is better.
Mortgage interest may be charged monthly.
Mortgage interest may be charged yearly.
On variable rate mortgages, it will depend on when the mortgage lender updates interest rates daily, weekly, monthly or annually.
There are many different ways that a given mortgage lender can choose to calculate APR, which means that you can't meaningfully use APR to compare mortgages. A better way to compare mortgages is to get quotes and compare the monthly payment figures, after taking into account any other mortgage charges that may not be included in the monthly amount.
What Other Fees and Charges Can Be Associated with a Mortgage?
Buildings Insurance
If you are buying a freehold property, it may be a condition of the mortgage that you have buildings insurance in place to cover your home in the event of fire, flooding and subsidence. The mortgage lender makes this condition as they want to be sure that their loan is insured against any such events occurring.
If you will be a leaseholder, you may not be responsible for buildings insurance since your freeholder will pay it. However, your mortgage lender may still wish to see evidence that the freeholder has this buildings insurance in place.
Conveyancing Fee
See our guide to the conveyancing process.
Early Repayment Charge
A charge for paying off your mortgage early. Commonly associated with remortages. Also known as a redemption penalty.
Exit Fee
A charge for exiting your mortgage early. Commonly associated with remortgages.
Mortgage Application Fee
Some lenders make a charge when you apply for a mortgage. This may also be known as a booking fee.
Mortgage Arrangement Fee
A fee made by the lender for arranging the mortgage. You may be given the option of paying it as a one-off charge, or having it added on to the mortgage. If possible, pay it as a one-off as if it's added to the mortgage you will then have to pay interest on it as well.
Lenders may split their arrangement fee into an application fee and a completion fee. Note that some lenders will still charge you the arrangement fee even if you are not accepted for a mortgage.
Mortgage Completion Fee
This is a fee payable when you get the mortgage funds. It can be considered part of the overall mortgage arrangement fee. A mortgage application fee may also have been charged too.
Redemption Penalty
A charge incurred if you pay off your mortgage early. Also known as an early repayment fee.
Survey and Valuation Fees
Your lender will either charge you for them to value your new property, or they may allow you to appoint your own surveyor to get a valuation done. If the lender allows your own surveyor, the lender is still likely to charge an admin fee to allow this, and the surveyor will have to be approved by the lender. The valuation fees that lenders charge vary greatly. As well as the valuation fee itself, some lenders may charge an additional admin fee for arranging the valuation. When quoting their valuation fee, some lenders may quote inclusive of their admin fee, others may quote exclusive of their admin fee.
First time buyers may be able to find a mortgage deal that includes a free valuation.
If you want a more detailed assessment of your property, some lenders will give you the option of upgrading from a standard valuation and paying more for a more indepth Home Buyers Report or a Full Structural Survey.
For remortgages, valuation fees will often be waived.
Higher Lending Charge
The Higher Lending Charge (HLC) is an additional charge made by the lender when you wish to borrow more than a given Loan to Valuation ratio, typically when you are asking for a Loan to Valuation ratio of more than 90%. Loans of higher Loan to Valuation ratio are more risky for the lender, so the Higher Lending Charge is applied so that they can buy an insurance policy (known as a Mortgage Indemnity Guarantee policy), that will compensate their losses in the event that you cannot keep up your repayments, the house has to be repossessed and you cannot settle the outstanding debt to the lender.
If you wish to borrow a very high percentage of the value of the property you wish to buy, then you may have to accept a Higher Lending Charge.
In the event that your house is repossessed, and the mortgage lender claims on the Mortgage Indemnity Guarantee Policy, then the insurer that provided the Mortgage Indemnity Guarantee may still pursue you for the amount they had to pay out to the mortgage lender.
Compulsory Insurance
Some mortgage policies will have compulsory insurance, which will increase the cost of your mortgage.
Stamp Duty
Stamp Duty Land Tax is charged on land and property transactions in the UK. Stamp Duty Land Tax (SDLT) rates vary according to whether you are a first time buyer, and the value of the property being bought. As at June 2010, first-time buyers do not pay stamp duty on properties valued up to £250,000.
| Stamp Duty Land Tax Rates as at June 2010 | ||
|---|---|---|
| Purchase price/lease premium or transfer value | SDLT rate | SDLT rate for first-time buyers |
| Up to £125,000 | Zero | Zero |
| Over £125,000 to £250,000 | 1% | Zero |
| Over £250,000 to £500,000 | 3% | 3% |
| Over £500,000 | 4% | 4% |
View Current Stamp Duty Land Tax Rates at HMRC
What's the Difference between Leasehold and Freehold?
Leasehold - You have rights to the property for a given period of time, after which it returns to the owner of the Freehold. The lease agreement may place additional obligations on you, e.g. for maintenance, and you will have to pay ground rent to the Freeholder.
Freehold - You are the owner of the property and land.
How much can you borrow with a mortgage?
Traditionally, you have been able to borrow up to three times your annual salary for a mortgage. In the property boom up to 2006, these multiples were being stretched, and mortgages up to five times your annual salary became available.
If you are buying as a couple, then normally you can borrow three times the main salary plus one times the secondary salary.
Other Mortgage Sites
Mortgage calculator - The site offers a free mortgage calculator.