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Home Loan
Welcome to our home loan page. We hope that you will find this page useful in your search for a new home loan. Below you will find an overview of home loan options along with along with links to some UK home loan providers.
What types of home loan are available in the UK?
A home loan usually takes the form of a mortgage, which is a loan secured against the value of the property. This means that the lender has the right to sell your property if you can't keep up the loan repayments. There are a number of different types of mortgage available for your home loan:
Fixed rate mortgage - The interest rate is fixed for a given period of time, usually for between two and five years. The advantage of this type of mortgage is that you will know the payment amount you will need to make each month, making budgeting easier.
Variable rate mortgage - The interest rate on your home loan will vary, with a dependency on Bank of England base rates. Obviously, this type of home loan is great when interest rates are low, but make sure you factor in a possible interest rate rise when calculating the size of home loan that you can afford.
Capped rate mortgage - This type of home loan is similar to a variable rate mortgage, but with a cap (or limit) on the highest interest rate that you will pay. This means that when interest rates dip below the cap, you can benefit from lower interest rates on your mortgage, but when interest rates rise above the cap, you are protected because the maximum interest rate you will pay is the capped rate.
Self certification mortgage - This type of home loan is for workers that don't have a regular salary, e.g. the self employed, freelancers and contractors. Self certification refers to the fact that the borrower declares what they earn themselves, and this is taken on partly in trust by the lender when deciding whether to grant a mortgage. In some cases the mortgage lender may ask for further proof of earnings, such as a statement from your accountant or your bank statements. Once the lender is satisfied with your earnings, the mortgage granted could be any of the common types, i.e. fixed, variable, capped etc. The rates for self certification mortgages will usually be slightly higher than standard mortgages because the lender is taking on more risk in accepting your self certification.
Discount mortgage - This is where the lender gives you a set percentage discount off their standard variable rate for a fixed period, the most common discount period being two years. Once the discount period has ended, you revert to paying the lender's standard variable rate.
100% mortgage - A home loan where you don't provide a deposit. As you are not putting down a deposit the lender is taking on more risk, and the rate you pay for your mortgage will be higher than it would otherwise have been. The lender may also require you to pay a Mortgage Indemnity Guarantee, which will protect the lender in the event of falling house prices (when their loan becomes even riskier because the value of the property on which it is secured is falling).
How large a deposit do I need for a home loan?
You will usually need a deposit of 5% of the home loan amount. The larger the deposit you can put down, the better the interest rate you can obtain.
How much can I borrow for a home loan?
The amount you can borrow for your home loan is called the capital. A mortgage lender will usually allow your home loan to be around three times your gross salary. If your partner will also be involved, then the size of their annual salary can usually be added to the home loan amount. Other lenders will grant you and your partner a home loan of two and a half times your joint income.
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