Beginners Guide To Mortgages And Remortgages

Getting a mortgage to buy a property (or a remortgage to get a
better deal on existing property) is not easy Mortgaging is a
complex process and will always involve some professional
services and advice
At a minimum you will require a solicitor to handle
conveyancing and title of the property, you may also use a
mortgage broker or advisor and even perhaps a property
consultant and/or surveyor (in addition to the surveyor acting
on behalf of mortgage lender)
For some, particularly first time buyers, dealing with all these
“experts” can seem daunting So lets examine some of the basic
issues regarding mortgages and remortgages to better prepare you
A mortgage is simply a “home loan”, basically a type of secured
loan using the property as security for the lender To protect
themselves lenders will need to know how much property is worth
just in case they have to sell it to recover the mortgage (ie
if you fail to make mortgage repayments), to establish rough
property value lenders will instruct a home valuation survey
Using the valuation recieved from survey report lenders can
establish the loan to value (LTV) they are willing to offer
Loan to value is a basically the percentage of the value of the
property up to which they are prepared to lend, for example, if
a property was valued at £100,000 and the mortgage lender was
happy to lend at 75% LTV, this means they will allow you to
borrow a maximum of £75,000 towards cost of property purchase,
with the balance remaining (£25,000 in this case) to be the
deposit
The lenders decide on the LTV available using various criteria,
firstly by checking your previous credit history, the “cleaner”
the credit profile the higher the LTV available So, for
example, for someone unlucky enough to have been through a
bankruptcy or other severe credit problem the lenders may be
willing to lend up to 70% LTV, but for a couple with impeccable
credit they may be happy to lend up to 110% of property
valuation
Secondly they have to assess your ability to repay, the way this
is normally achieved is by using income multiples, for instance
if you earn £25,000 gross per annum, some lenders will stipulate
that they will lend a maximum of 3* income (in this case £75,000
irrespective of property value)
Basically the credit checks assess the probability of you
repaying the mortgage while your income is used to assess
ability to repay

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