Mortgages Explained




Mortgages key factors to consider


There are various key factors that you should consider before you get your mortgage.

Before you get a mortgage

There are a number of services that need to be paid for before you get the mortgage:

Legal costs
Arrangement fees
Broker fees

Legal costs

Usually a solicitor or licensed conveyancer needs to be appointed to deal with the legal aspects of buying a property. There will be costs involved and these can vary, so it is worth getting a few quotes.

Valuation / surveys

Your lender will value the property to make sure it is acceptable security for the loan. The type of valuation will depend on the property type and who your lender is. Some lenders now just do a drive-past valuation for low risk properties. If you want to buy a listed thatched cottage, the valuation will be more in depth and so more expensive.

You should always consider whether to rely on the lender's valuation, or to have your own survey done which will highlight any shortcomings in the property, like damp in the walls or in the roof. The price of the survey could save you a fortune on unforeseen repairs in the future.
The seller of the property in England or Wales must provide a Home Information Pack. This may contain a Home Condition Report, which is effectively a survey report. This may save you time and money as a buyer.

Mortgage arrangement fees

Most mortgage lenders charge an arrangement or application fee when you take out a mortgage. Some mortgage lenders will let you add the cost of this to the mortgage. The fee depends on the mortgage lender and the mortgage offer.

Broker fees

Mortgage brokers will usually charge a one-off fee payable on completion of the purchase. This fee can vary enormously and depends on the broker or company.

The Mortgage

How much can you borrow?

Getting a mortgage is not guaranteed and you should find out how much you are able to borrow before going too far. You may also need a substantial deposit.

The lender will decide how much deposit you need. The ratio between the amount of the mortgage and the value of property is called the loan to value amount (LTV). For a 90,000 mortgage on a property worth 100,000 the LTV would be 90%, so you'll need a deposit of 10,000.

The credit crunch has seen most lenders tighten their lending criteria, including lowering their maximum LTVs. This means a bigger deposit is needed from the borrower.

Mortgage rates

Mortgage rates are linked to Bank of England base rate, and the rates at which banks lend money to each other.

Obviously rates vary and this makes a big difference to how much you have to pay each month.
You should also make sure you compare the total cost of the mortgage. The figures can look very high and not seem to bear any relation to the purchase price of the property but the true cost figure highlights how much your mortgage will cost over the years. Unless you're on a fixed mortgage it will no doubt change, but still gives you another method to compare mortgages.

Repaying the loan at the end of the term


There are two parts to pay back on any mortgage, the capital and the interest on the capital. In a repayment mortgage a part of both the capital and the interest are paid back monthly. At the end of the term of the mortgage the full amount is repaid and the property owned outright. The monthly payments are higher with this type of mortgage because the entire loan is being paid back.

Interest Only

There are two parts to pay back on any mortgage, the capital and the interest on the capital. In an interest only mortgage the capital is not repaid at all, only the interest is paid monthly. At the end of the term of the mortgage the full amount originally borrowed, the capital, is still outstanding. The monthly payments are lower with this type of mortgage because only a part of the loan is being paid back.
You can get fixed rate mortgages, variable rate mortgages and discounted rate mortgages on either a repayment or interest only basis. You can also get a proportion of your mortgage on each basis to hedge your bets.

Can you afford the repayments?

Your lender should do a careful assessment of your ability to repay the mortgage and should only lend what they think you can repay. However, things change so you should try to have a contingency fund available.

Fixed interest rates are usually only applicable for a set amount of time, commonly 2 5 years. The incentive is that regardless of trends in the national interest rates the payments on your mortgage will not change. This offers a certain level of security in knowing that your mortgage will not rise drastically in the fixed rate period. Conversely the gamble is that the rates do not decrease, if they do then you will be paying more than would normally be necessary.


If a mortgage is portable, it means you can keep it with the same lender if you move house. They may waive or reduce early repayment fees if you're on a fixed rate or discounted rate deal. So if you think you may move in the next few years, this could save you a lot of money.

Mortgage related insurance

A buildings insurance policy will be required by the lender, covering against the usual risks. This ensures their security is protected.
Home contents insurance covers your contents against as theft, fire and damage.
Mortgage payment protection ensures you can continue to meet your mortgage repayments in the event of unemployment, sickness and redundancy
Life insurance for each of the mortgage holders taken out to cover the value of the mortgage allows the mortgage to be repaid in full in the event of death.

Using a mortgage broker

If you use a mortgage broker, make sure they are authorised by the Financial Services Authority. You can check by looking at the FSA's register of authorised firms at

Are you still confused?. Let EFS do all the hard work and find the right mortgage to suit your needs and circumstances.

Buy to let mortgages are not typically regulated by the FSA


Commercial Mortgages and Buy to let mortgages are not typically regulated by the FSA


We do not charge a fee for mortgage advice. A fee based option is available of typically 2% of the mortgage amount.
For example on a loan of £25,000 the fee would be £500

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