Residential Mortgage
Explore the complete guide to residential mortgages today and get expert help if you need it! Contact us to learn more about how we can support you.
Securing a residential mortgage can be overwhelming when buying a home. Moreover, the various mortgage types add to the challenge.
This guide explains everything about mortgage types, interest rates, processes, and more. Thus, whether you’re a first-time buyer or an experienced investor, this guide will help.
We will explore the details of these mortgages to help you make an informed decision. So, let’s begin!
What is a Residential Mortgage?
A residential mortgage is a loan to buy a property to live in. The mortgage loan is secured on the property. If you cannot make payments, your lender can take ownership of the property and sell it to recover losses.
Typically, residential mortgages are based on the property’s value, creditworthiness, and income. Rates for this mortgage can be fixed or variable; it’s your choice. If you choose a fixed rate, your monthly payments will stay the same throughout the fixed term. A variable rate means the interest rate may change, so your monthly payments can go up or down.
Residential mortgages are paid back in monthly instalments over 5-40 years. Most people take a ‘capital and interest’ mortgage, sometimes called a ‘repayment mortgage’. This means the monthly payment consists of the interest cost and an element to repay the debt, so the mortgage is fully repaid at the end of the term.
For higher earners or those with a larger deposit, it is possible to take an interest-only mortgage. This means lower monthly payments. You would need to have the means to repay the whole debt at the end of the mortgage term. The lender would also need to agree that your repayment strategy is credible.
What is Second Residential Mortgage?
A second residential mortgage is a loan in addition to an existing one. These loans are secured on the same property as the first mortgage. After your initial purchase, a second mortgage can be used for home improvements or debt consolidation. Additionally, it can help a family member or address other needs.
A second residential mortgage comes from a different lender than the first one. It’s usually referred to as a second charge because the first lender has the ‘first charge’ claim against the property if anything goes wrong.
Due to the added risk of being second in line, second-charge mortgages often have higher interest rates and fees. The first charge lender may sometimes consider additional borrowing, called a further advance.
Whether you are buying your first home or moving, a Connect adviser can help. They can also assist if you want to raise further capital or get a better mortgage rate. Be sure to speak with our mortgage advisers for specific information. They can help you understand your options and find the right mortgage for your needs.
The Benefits of Residential Mortgages
How Does a Residential Mortgage Work?
How Does Interest on Residential Mortgage Work?
Interest is the percentage of a loan paid over time to the lender for borrowing money. Residential mortgages require borrowers to pay interest on their loans based on an Annual Percentage Rate (APR). The APR considers the total cost of a loan, including interest rates and extra fees.
Lenders set interest rates on these mortgages, which vary based on the borrower’s credit score, loan amount, and repayment term length. Furthermore, the higher the risk to the lender, the higher the interest rate they will require.
While the best rates are reserved for clients with the lowest risk, obtaining a competitive mortgage rate is still possible. Even if you have credit issues, such as late payments on other credit or County Court Judgements (CCJs).
Mortgage Advice..
Thinking of getting a mortgage? Our experienced team of skilled mortgage advisers are here to offer the essential guidance you require. Relying on our comprehensive understanding of the mortgage market, we’ll ensure you secure the perfect mortgage to suit your specific situation.
Mortgage Advice..
Thinking of getting a mortgage? Our experienced team of skilled mortgage advisers are here to offer the essential guidance you require. Relying on our comprehensive understanding of the mortgage market, we’ll ensure you secure the perfect mortgage to suit your specific situation.
Residential and Commercial Mortgage
Residential mortgages are for buying a home, flat, or other residential property you plan to live in. They usually need repayment by retirement, as they rely on their working income. However, some specialist residential mortgages let you have a mortgage in retirement.
Residential mortgage lenders require a down payment, called a deposit, to reduce risk. The deposit can be as low as 5%, but a bigger deposit secures a lower interest rate.
Conversely, commercial mortgages buy business properties like offices, warehouses, and retail stores. They have shorter terms, typically 5-20 years, and higher interest rates than residential mortgages.
Commercial mortgage lenders usually require a bigger deposit to reduce risk, ranging from 25% to 40%. Additionally, commercial mortgages may have higher fees and other costs associated with the loan.
Both residential and commercial mortgages offer variable or fixed interest rates to choose from.
Buy to Let vs Residential Mortgages
The following are some differences between buy to let vs residential mortgages
Buy to Let
- Purpose: Buy-to-let mortgages are designed for landlords who want to purchase properties specifically to rent out to another person or family.
- Term: Buy-to-let mortgages can often have longer repayment terms, which can go into retirement.
- Interest Rates: Higher interest rates.
- Deposit: Buy-to-let mortgage lenders typically require borrowers to make a larger down payment (25% – 30%) than residential mortgage lenders to reduce risk.
- Fees and Costs: Additionally, buy-to-let mortgages may have higher fees and other costs associated with the loan.
Residential Mortgages
Purpose: It is designed for purchasing a house, flat, or other residential property for the purchaser to live in.
Term: It typically needs to be repaid by retirement. (Unless you take a specialist mortgage called RIO or Equity Release)
Interest Rates: Lower interest rates than commercial or Buy to let mortgages.
Deposit: Residential mortgage lenders also require borrowers to make a down payment to reduce risk but can be as low as 5%.
Fees and Costs: It may also involve different fees and other loan-related charges.
Residential Mortgage Rates
Residential Mortgage Calculator
Residential Mortgage Advisers or Mortgage Brokers
You may have heard of mortgage advisers and mortgage brokers and wondered about the difference. The term mortgage adviser usually refers to qualified, experienced advisers for residential and buy-to-let mortgages. Conversely, the term mortgage broker often applies to advisers in specialist markets like commercial.
Whether called an adviser or a broker, all mortgage specialists guide you in understanding your needs and finding the right lending solution. At Connect Mortgages, our residential mortgage advisers are knowledgeable and experienced in helping consumers find the best residential mortgage loans.
We can access over 170 lenders, ensuring you get the most suitable rate and terms. Additionally, our mortgage specialists guide you through the entire process of obtaining a residential mortgage loan. Therefore, you can be confident you are getting the best deal possible. Contact us today to get started!
Eligibility
To be eligible for a residential mortgage, applicants must meet specific criteria, including:
- Aged 18 or over
- And purchasing a property in England, Wales, or Scotland.
- Applicants must also have sufficient income to cover the monthly mortgage payments and other living expenses.
It is possible to arrange a residential mortgage even where you have complex requirements. For example, we can assist customers who have had credit blips or been turned down by high street lenders. Or have only been self-employed for a year, are employees working on contracts and more.
If you would like to know if you qualify for a mortgage, contact us today.
Change a Residential Mortgage to a Buy to Let Mortgage
If you have an existing residential mortgage but want to move out, we can assist you. Moreover, our team can help convert your residential mortgage to a buy-to-let mortgage.
If you have sufficient equity, we can also help you raise capital. This money could be used as a deposit for your new residential mortgage.
Many portfolio buy-to-let investors begin their journey this way. They use a specific type of buy-to-let mortgage called a ‘Consumer buy-to-let’ mortgage. For more information, visit the buy-to-let pages on this website.
If you need advice, our Connect mortgage advisers will consider your financial situation. They will provide tailored advice on your ideal options. Our advisers are knowledgeable about all types of mortgages. We can help you switch from a residential mortgage to a buy-to-let mortgage if this is the best solution for you.
Final Thought
FAQs: Residential Mortgage
Most frequent questions and answers about residential mortgage
Consent to Let is an arrangement where the lender allows the borrower to rent their property. This period lasts until they can switch to a residential BTL mortgage. Moreover, this option gives the borrower time and flexibility when finding alternative housing solutions. It is crucial to seek consent; otherwise, you will breach the lender’s rules. Additionally, you can speak with an adviser about remortgaging to a buy-to-let mortgage.
You cannot change your buy-to-let mortgage to a residential mortgage without a full affordability and underwriting assessment. This is because a buy-to-let mortgage relies on rental income, not your personal payments. If you move into a property with a buy-to-let mortgage, you will breach the lender’s conditions. Such a breach can seriously affect your ability to get future mortgages. However, a good mortgage adviser can help you make the changes correctly.
Yes, it is possible to have both buy to let and residential mortgage simultaneously. However, it is important to assess your financial situation before taking on any additional debt.
It is not allowed to rent out a property with a residential mortgage without the lender’s permission, as it is considered mortgage fraud. If discovered, the lender may demand repayment or repossession of the property.
What next?
We will come back to you quickly to let you know how we can help. If you would like to speak to us immediately, call us on 01708 676 111.
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About the Author
Liz Syms is the CEO and Founder of Connect Mortgages, a specialist in finance for property investment. With over 25 years of experience in mortgages and financial services, Liz has helped countless people get their dream homes and investment properties. She is passionate about giving her clients the best advice possible when it comes to financial decisions relating to mortgages and protection and is dedicated to providing the highest quality of service. With her wealth of knowledge in the industry, Liz is a respected leader in mortgages and financial services and has grown her team to over 300 advisers nationally. She strives to make Connect Mortgages one of the most successful companies in its field.
About the Author
Liz Syms is the CEO and Founder of Connect Mortgages, a specialist in finance for property investment. With over 25 years of experience in mortgages and financial services, Liz has helped countless people get their dream homes and investment properties. She is passionate about giving her clients the best advice possible when it comes to financial decisions relating to mortgages and protection and is dedicated to providing the highest quality of service. With her wealth of knowledge in the industry, Liz is a respected leader in mortgages and financial services and has grown her team to over 300 advisers nationally. She strives to make Connect Mortgages one of the most successful companies in its field.