What is a mortgage?
A mortgage is a loan taken out to buy a house, property or land.
The loan is ‘secured’ against the value of your home and typically runs over a period of 25 years but the term can be shorter or longer. The money which you borrow is called the capital and the bank/ building society then charges you interest on it until it is fully repaid. In the first few years of repaying your mortgage, a larger portion is taken to pay off the interest and a smaller amount goes towards paying off the capital.
What happens if you fail to keep up mortgage payments?
If you fail to keep up with the scheduled repayments, the lender can repossess your property and sell it on to recoup their money.
How do ‘Buy-to-Let’ mortgages work?
Buy-to-Let ( BLT) mortgages are essentially for landlords who want to buy property to rent it out. They are a lot like a normal residential mortgage but with some notable differences.
The minimum deposit for a buy-to-let mortgage is usually around 25% of the property value but it can be as high as 40% depending on the lender. The maximum which you can borrow is dependent on the amount of rental income which you expect to receive. Typically, banks/building societies require the rental income to be 25-30% higher than the scheduled monthly mortgage repayment.
The majority of the bigger banks offer Buy-to-Let mortgages. It is advisable to speak with a trusted mortgage broker before deciding on a buy-to-let loan as they can help and guide you in choosing the most suitable deal relevant to your circumstances.
How do Interest-Only mortgages work?
In acquiring an interest-only mortgage, you only pay the interest due on the amount borrowed each month and not on the capital loan amount. Because you are only paying off the interest, your monthly payments will be much lower than a typical repayment mortgage. You will still however have to pay back the full amount at the end of the term. Usually, banks will require a much larger deposit typically around 50% and also an assurance that you have a repayment strategy in place so that you’ll have the money to pay off the capital at the end of the mortgage. This is likely to mean paying regularly into savings/investments or could include pensions.
What way do Joint Mortgages work?
A joint mortgage is where you can buy a property with another person usually a partner, relative or friend. Each person named on the mortgage is equally responsible for making the repayments each month. Should one person be unable to pay their half, the other person will have to pay the full amount. There are two ways which you can each own your property with a joint mortgage..Joint Tenants or Tenants in Common
Owning the property equally as joint tenants is usually the most appropriate for spouses, partners or those in long term relationships. You both would have equal rights to the property and if one passed away, the other would automatically inherit their share. If you are joint tenants, you will need the full agreement of the other person on the mortgage before you can sell the property.
A tenants in common mortgage is an arrangement which allows two or more people to have an agreed share in a property. The agreed share in the property does not have to be equal...each person can have a different percentage.
Each person in the agreement can decide who will inherit their individual share in their will.
It can be most suitable for couples, relatives or friends who want to buy a property together but want to protect their investment.
See our Mortgage Broker page or contact our Mortgage Team on (01) 513 8710 or info@citywidefinancial.ie for more information
Rob O’Neill
Mortgage Specialist
Citywide Financial