What is a mortgage?
A mortgage is a loan that allows you to buy a property. For many, it’s not possible to buy a property outright so you put down a percentage of the value of the property (a deposit) and a mortgage lender (usually a bank or building society) lend you the rest. You then pay off an amount every month until the debt is repaid. Your mortgage repayment amount is worked out based on how much you borrow, the rate of interest and the length of the mortgage.
What’s the difference between a broker, an adviser and a lender?
A lender provides the money for your mortgage. It is usually a bank or a building society. An adviser or mortgage broker is someone independent from the lenders who has access to a variety of different lender offers and can broker the deal for you.
How much can I borrow?
The general rule is that you can borrow 4.5 times your annual income. So if you make £30,000 a year, you could borrow £135,000. If you had saved £20,000 as a deposit, you could look at properties priced at £155,000. Knowing how much you can borrow means you can adapt your property search to different areas or types of property. It can also tell you if you need to increase your income or your deposit.
What does LTV mean?
LTV stands for Loan To Value and it refers to the difference in what you’re borrowing and what you’re providing as a deposit. So if a mortgage has an LTV of 80%, it means the lender will supply 80% of the value of the property and you need to supply a 20% deposit. The bigger the deposit, the lower the LTV and the better the rates on your mortgage.