There are many types available on the market today, so it is crucial to understand which mortgage you need to get the right deal.
All types of mortgages function in the same manner, but factors like interest rates and repayment methods can differ among products. This means that finding the best deal does not just involve choosing the lowest rate. Instead, it is about finding the mortgage that suits your financial needs.
This guide will explain the differences between different types and discuss their pros, to get you up to speed. First, we’ll discuss the differences between interest-only mortgages and repayment. Then, we’ll move on to fixed-rate mortgages. Both types of repayment mortgage are covered. We’ll also talk about:
- Buy-to-let mortgages
- Guarantor mortgages
- Joint mortgages
What Is A Mortgage Buy-To-Let?
A buy-to-let mortgage can be a product that is targeted at potential landlords who wish to purchase a property to lease out to others.
There are several key differences between residential mortgages and buy to let mortgages. Lenders won’t base the amount of money that you can borrow on your income. Instead, they will look at the rent you are expecting from your tenants. Lenders will usually require that the annual rent is equal to 125% of your mortgage repayments.
The fees and interest rate are generally higher than regular products and the minimum deposit required for a property is typically 20-40%.
There are two interest-free mortgages, but most landlords opt for an interest-only product due to the lower monthly payment. However, a repayment mortgage buy-to-let is an option if the monthly payments are lower and you don’t want to pay off large amounts of money.
A majority of lenders will require that you have a strong credit history and earn a regular income to qualify for a buy-to-let loan. Most of these loans will also require that you can take on the responsibility of a second home mortgage. Nearly all lenders will not approve first-time buyers for a purchase-to-let loan.
mortgageexpertsonline.co.uk advice can help find the right deal for your property. We will also help you to navigate the application process.
What Is A Joint Mortgage?
A joint mortgage is a product that allows one or more people to borrow a mortgage. Each person named on the agreement is responsible for repaying, and you’ll have to decide how much equity you want. For most mortgage types, joint deals can be applied for.
While joint mortgages between couples are the most popular, they are also available for groups of more than two people. It doesn’t matter if you have family members or friends who want to live together, a spouse or business partner that wants to invest in your property, you can pool all of your resources.
It’s possible to apply for a joint loan to help you purchase more expensive properties than you could on your own. The lender will assess your monthly income, credit history, and monthly expenses to calculate how much you can borrow. They’ll also do the same for a regular mortgage request.
A group of people can put their savings together to pay a higher deposit. This gives you access to more mortgage products and terms. However, your co-buyer will be able to help you discuss the various options to make sure you get a deal that is right for you.
What Is A “Guarantor Mortgage”?
A guarantor mortgage is a type of product designed to help people who aren’t in a position to purchase a mortgage. It involves bringing someone else to the table who can handle the deal. If you don’t earn enough, can’t afford a deposit or have poor credit, a friend or family member may act as a Guarantor and cover any missed payments.
A guarantor will help you pay for a property but they won’t have any ownership or be named on deeds. They do not take on financial responsibility, but they must provide security for the lender. This typically involves either putting up their home or saving a lump amount until the agreed-upon portion of your mortgage has been paid.
Many lenders will accept a friend/family member for guarantor loans. However, some lenders may require this to be a family member. Guarantors must have enough income to cover repayments as well as own property or a substantial amount of equity. Lenders may also require proof that a friend or family member has sought out legal advice before they agree to a deal.
