Find The Best Mortgage In Guernsey For You
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Finding the Best Mortgage
Are you in the market for a new mortgage in Guernsey or beyond? Whether you’re looking for your first property or you’re remortgaging at the start of your retirement, it’s always smart to look for the best mortgage rates and terms.
A mortgage is a special type of loan that can help you buy a property, like a home or a rental investment. However, unlike a typical loan, mortgages are repayable over a longer period of time, usually between 15 and 30 years. You make fixed payments on the principal of your mortgage (the amount you borrowed) as well as the interest it accrues.
Choosing to get a mortgage and deciding which mortgage to go with are both huge decisions. You need to save over time for your mortgage deposit and also make sure you can afford to make your mortgage repayments every month for decades moving forward.
That’s where we can help. We’ll help you find the best mortgage, no matter what you require.
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What Types of Mortgages Are Available?
There are quite a few different mortgages available in the UK, and you might be wondering what is best for your needs. Your best mortgage will depend on your personal circumstances, including income, employment history, and your future plans. Of course, it also depends on the property you want to buy.
Check out some of these common mortgages.
Fixed-rate mortgages
A fixed-rate mortgage gives you guaranteed repayments for two to five years, allowing you to plan your next few years. Your payments will be fixed, so even if the interest rate increases, you’ll still pay the same rate. However, if the interest rates drop, you’ll be tied to that higher rate until the set period is up.
Variable rate mortgages
Variable rate mortgages fluctuate when the Bank of England interest rate changes, but your lender can also choose to raise or lower the rate. That means you sign up for a certain degree of risk, and so you usually get better terms and rates.
Here are some of the most common variable-rate mortgages available:
- Standard variable rate (SVR) mortgages – SVR mortgages rely on your lender’s standard interest rate. At the end of your variable rate mortgage term, you’ll usually renegotiate – but if you don’t, they’ll usually swap you over to their SVR rate. This usually isn’t in your favour, so watch out for this switch.
- Discount mortgages – Discount mortgage rates track the lender’s standard variable rate plus a set percentage. So, if your lender’s SVR goes up by .75%, your interest will, too.
- Tracker mortgages – Tracker mortgages ‘track’ the Bank of England’s interest rate and then add a percentage on top. If you see the BoE lower their interest rate, you mortgage rate will also decrease by the same percentage.
- Offset mortgages – Offset mortgages are tied to your savings. The interest on your savings account is linked to your mortgage and it offsets your loan balance. While you might pay lower interest over time on your mortgage, you’ll stop earning interest on your savings account. Your savings will also be tied up, and you won’t be able to access it quickly.
How Much Can You Borrow?
Lenders look at a long list of factors before they decide how much they want to lend you for your mortgage. They’ll look at:
- Income – Lenders look at your personal income and/or your income combined with your co-applicant’s income.
- Additional earnings – Do you earn any extra money, like bonuses, dividends from a company, tax credits, or any extra income?
- The size of your deposit - How much money do you have for a deposit on your home or property? Most lenders expect to see at least 5 – 10% of the entire amount that you want to borrow.
- Your monthly expenses – How much do you spend every month on your expenses, such as bills, insurance, and credit card payments?
- Your credit rating – Lenders want to see that you have a good credit rating – this helps them to know they can trust you to make your payments on time. With a better credit score, you’ll access better rates and terms.
How Big does My Deposit Need to be?
Most lenders want you to have a deposit of 5% - 10% of the entire mortgage amount. If you can manage to save more than this, you can usually negotiate a better terms, lower fees, and lower interest rates.
That said, it can be difficult to save the required amount for a mortgage deposit. If you’re struggling, look into certain government schemes and programmes, including Right to Buy and Help to Buy. Both schemes help people who want to buy a home but don’t have a large enough deposit.
Repayment vs Interest-Only Mortgages
You’ll usually see mortgages referred to as repayment (the most common option) or interest-only (which is less common). But what do these terms mean?
Repayment Mortgages
Repayment mortgages are the most common option on the market. Simply put, you pay back the principal (the amount you borrowed for the house) plus the interest accrued over time. With every payment, your principal gets lower until you eventually own the property outright.
Interest-only Mortgages
With an interest-only mortgage, which is uncommon for residential properties, you only pay the interest every month. You pay nothing towards the principal that you borrowed at the beginning of your mortgage term.
When the end of the term is over, you then owe the entire principal. You need to save for this amount separately or sell the property to pay back your mortgage. This is a more common option for buy-to-let mortgages.
What Type of Mortgage Suits Your Needs?
Lenders offer different mortgages for a wide variety of circumstances.
First-time buyer
Many lenders offer mortgages for first-time buyers. You’ll qualify if you have never owned a residential property, even if you never lived there.
Moving home (Porting)
You might be able to ‘port’ your mortgage if you’re moving home – essentially, this means taking it with you. However, if your new property is valued higher or lower than your current property, you might run into problems. You’ll need to undergo new credit search when you port your mortgage, which is a problem if your score is lower than it was.
Remortgaging
If your current mortgage term ends in less than six months, you might be able to remortgage your home. Some people make the switch to a repayment mortgage, choose to borrow more money, or find ways to money on their current payments.
Buy-to-let
Buy-to-let mortgages allow you to rent out your property to tenants or use it for AirBnB. These mortgages cost more and usually have higher interest rates, and lenders will want to see that you have previous landlord experience.
What details do mortgage lenders want?
We’ll ask for some specific details to check your eligibility.
Your details
Tell us your name, address, and employment details. We’ll also ask if you’re applying on your own or if this is a joint application.
Property Details
Do you want to buy a new build, a flat, or a home? Is the property freehold or leasehold?
Your situation
Do you want to remortgage? Are you a first-time buyer? Are you moving to a new property?
How much?
What amount are you hoping to borrow? Most people look for the cost of the property, less the deposit they have.
Your earnings
How much do you earn before tax every year? Make sure you include extras like overtime pay, commissions, and bonuses.
How You Can Qualify for a Better Mortgage Rate
Comparing mortgage rates is a great way to find the best terms and rates. But you can also be proactive and make changes to your lifestyle to get the best possible mortgage rate – make sure you’re doing the following:
List of Services
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Build the biggest deposit possibleList Item 1
The bigger a deposit you can save the less money you’ll have to borrow. If you have a larger deposit, you can usually negotiate better terms.
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Work on your credit scoreList Item 2
All lenders want to see your credit score before they commit to lending you money, and on what terms. It pays to try to improve your credit score before you apply for mortgages.
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Make sure you’re on the electoral rollList Item 3
Get on your local electoral register, and make sure it’s updated every time you move. This is a quick and easy way to boost your credit score.
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Never miss a bill paymentList Item 4
Missing bill payments sends the wrong message to lenders – they’re much less likely to lend you the money you need if you miss any payments.
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Start now
There’s no better time than the present – start paying down debt and saving for your deposit now. Lenders usually look at around a year’s worth of your credit history.
FAQs: How to Get a Mortgage
These are some of the most frequently asked questions about getting a mortgage in Guernsey.