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Facts about Mortgage Financing in the United Kingdom

Mortgage financing is necessary for buying or building an estate property in the United Kingdom. Financing can be obtained by a citizen who is older than 18 and has a stable financial profile.  When lending the mortgage, a bank will take into account whether you are a citizen of the country. The loan also depends on your creditworthiness and credit rating. The decision on the loan amount will be based on the size of your annual income.

Loan Types

There are several types of long-term loans. They include residential, investment and commercial mortgages. Residential mortgages are primarily intended for those planning to get a home for personal use. A common requirement of lenders is that borrowers must be a temporary or permanent resident. In this case the deposit is usually from 5% to 15% of the property value. The loan typically has a term of 25 years. It can be repaid or re-financed on more favorable terms at any time. Investment mortgages can benefit those who want to purchase a house as a rental property. Commercial mortgages are used in operations with commercial real estate.

Additional Costs

If you are going to use mortgage financing, you should be prepared for additional costs. A lawyer takes 0.5% of your purchase cost. The second component of the expenditure is an assessment of the property condition. The following consumption is re-ownership of the estate. The ownership of the property is registered in the HM Land Registry. Individuals must register and pay a special tax, known as Stamp Duty, which depends on the value of the property.

Loan Repayment

Repayment of a mortgage is typically in the form of principal and interest payments. Additionally, other costs include taxes and insurance. These four factors make up the total of a mortgage payment. In the beginning years of repayment, there is more paid to the interest than the principal. However, payments made to the loan over time, the interest payments will become much less as the overall principal is reduced.

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