Entering the world of property buying can feel like stepping into a foreign country, especially when it comes to understanding mortgage terms. However, arming yourself with knowledge can alleviate the anxiety associated with buying real estate. So, let's dive into the common phrases and terms associated with mortgages and property buying to better prepare you for your journey.
Principal: The Heart of Your Mortgage
The term 'Principal' refers to the original amount of money you borrowed to buy your home; it’s another word for capital or balance. This figure doesn't include interest, which is the fee charged by a lender that brokers work with. Over time, on a repayment mortgage, with each mortgage payment, you slowly pay down this principal, reducing the amount you owe. Interest Only mortgages are different, as repayments don’t touch the principal.
Interest: The Cost of Borrowing
Interest can be considered as the rent you pay to borrow money from the bank. It's usually expressed as a percentage known or interest rate. This rate can be fixed, remaining the same for a fixed term, typically up to five years, or adjustable, which means it varies in response to the current base rate.
SDLT: Stamp Duty Land Tax And What It Means for Buyers
Stamp Duty Land Tax, or SDLT is a tax levied on the purchase of properties over a certain price threshold. A buyer’s SDLT rates vary depending on the property's value and can impact the overall cost of buying a home.
Refinancing: Trading for Better Terms
Refinancing involves replacing your existing mortgage with a new one. Homeowners often do this to take advantage of lower interest rates, reduce their monthly payments, secure a new fixed-rate deal, or tap into their home's equity.
Self-Employed Mortgages: The Path for Entrepreneurs
Lenders often view mortgages for self-employed people as a higher risk because their income can be less predictable than those on a salaried income. Typically, you will need to provide two years' worth of certified accounts or tax returns to prove your income. Some lenders may also consider retained profits when assessing income.
If you’re looking for self employed mortgages, Bristol has some of the best properties with favourable terms. Just remember, the key to securing a mortgage when you're self-employed is to prepare well, keep your financial documents organised, and work with a reputable lender or broker, like The Mortgage Company, who understands your unique needs.
Limited Company Mortgages: Investing as a Business Entity
Limited company mortgages are applicable to larger landlords with a property portfolio within the wrapper of a limited company. Rather than buying a property as an individual, you can get mortgages for ltd company directors. Working with a Dallas Mortgage Lender can provide tailored solutions that suit the unique needs of limited company directors looking to expand their property portfolio.
Decoding mortgage lingo is an empowering step towards successful property ownership. With these terms in your back pocket, you're better equipped to make informed decisions. Remember, buying a property is not just about finding the perfect place; it's about finding the perfect financial agreement that suits your budget and lifestyle.