Mortgages

A mortgage ‘offer in principle’ is an initial agreement from a lender that they’re willing to lend you a certain amount based on your financial situation. It is not legally binding. A ‘mortgage offer’ is a formal document issued by the lender after they’ve completed checks on your finances and the property, and this is legally binding. You can move forward with your purchase once the offer is in place.

It’s a good idea to start the mortgage process as soon as you begin house hunting. Having a mortgage agreement in principle early on gives you a clearer idea of your budget and makes you a more attractive buyer to sellers. You should aim to have a mortgage offer secured by the time your property offer is accepted.

Most lenders require a deposit of at least 5-20% of the property’s value. The higher your deposit, the better mortgage deals you may be able to access, as lenders see a larger deposit as a lower risk. A larger deposit can also lower your monthly repayments and interest rate.

Lenders assess your mortgage affordability by looking at your income, regular expenses, and any outstanding debts. They will also stress-test your ability to afford repayments if interest rates were to rise. This helps lenders ensure you can manage the mortgage payments comfortably without risking financial hardship.

The mortgage interest rate is the percentage charged by your lender on the loan amount you borrow. It directly affects your monthly payments. A higher interest rate increases your payments, while a lower rate reduces them. Interest rates can be fixed for a certain period or variable, meaning they can change with the market.