An introduction to getting a mortgage quote

by Barclays Wealth International on November 12, 2010

Mortgage quote

What is a mortgage quote?

This is an introduction to help you get a mortgage quote that is right for you.

A mortgage quote is an estimate of how much you can borrow to buy a property including the interest rate, fees and mortgage structure. In order to get the right mortgage for your requirements you will need to know what mortgages are available to you and which ones are appropriate for your needs.

We also have other guides including one on international mortgages.

How to use this guide

Take each of the following steps in turn to find out which mortgages could suit you best, and what information you might need to provide in order to get a good quote.

  • Step One – Your personal circumstances. Choose the personal circumstances that most closely match your own to see the types of mortgage you can get.
  • Step Two – The purpose of the mortgage. This gives a brief explanation of each type of mortgage.
  • Step Three – Types of mortgage structure. Once you have decided the purpose of the mortgage you will need to know what sort of repayment structure you want.
  • Step Four – Information you may need to provide. This outlines most of the remaining information you will need to have ready in order to get a mortgage quote.
  • Step Five – Apply for a mortgage quote.

Your personal circumstances

UK citizen living in the UK and buying in the UK

You can consider ‘buy-to-let’, ‘foreign currency’, ‘overseas investment’, ‘primary residence’ and ‘remortgage’.

UK citizen living in the UK but buying overseas

You can consider ‘foreign currency’, ‘offshore’ and ‘international investment’.

Non-UK citizen buying in the UK

You can consider ‘buy-to-let’, ‘foreign currency’, ‘international student’, ‘offshore’, ‘primary residence’ and ‘remortgage’.

UK citizen living overseas and buying overseas

You can consider ‘foreign currency mortgage’ ‘offshore mortgage’ and ‘investment mortgage’.

Residents of the Isle of Man, Jersey and Gibraltar buying locally

There are tailored mortgages available to you from local providers.

The purpose of the mortgage

Buy to let mortgage – Investment property in the UK

A buy-to-let mortgage is a type of investment mortgage. It is required if you are buying a property from which you intend make money by letting it out to tenants.

The amount of money lent to you will depend more on the likely revenue generated by the tenants than by your personal financial earnings and wealth. Also the deposit required, from 40% upwards, tends to be higher for a buy-to-let mortgage than for a primary residence mortgage.

Foreign currency mortgage

You may want a mortgage in a currency other than sterling if you are not being paid in sterling. This may help to mitigate against possible costs incurred by exchange rate changes.

International investment – Investment property or second home overseas

An international investment mortgage is used for buying a property outside the UK that is either a second home or intended to be let out to tenants.

International student mortgage

This is designed for people coming to the UK to study. It is difficult for international students to get a conventional mortgage because they may have insufficient income and credit history in the UK.

Some lenders will offer international students a mortgage by taking into account their international financial circumstances or that of their parents.

Offshore mortgage

This is designed primarily for financial efficiency. It makes use of existing accounts outside the UK.

Under current UK tax law, an offshore mortgage has no tax benefits from having an onshore mortgage.

Primary residence mortgage

This mortgage is used for buying property to use as your main home in the UK. For most people this is the easiest mortgage to obtain as it takes into account the total earnings of the property owners.

Remortgage

This is the process of replacing an existing mortgage with one that better suits the borrower’s needs. The borrower will usually remortgage to get a more competitive interest rate, to increase flexibility or to pay off other non-mortgage debt.

Types of mortgage structure

Once you have determined what mortgages are appropriate for the property you are purchasing you need to choose the structure that best meets your needs.

Fixed rate mortgage

This is an introductory period at the beginning of the mortgage in which the interest charged on the mortgage does not change. Although not as flexible as a variable rate mortgage, this arrangement enables the borrower to plan ahead as they know precisely what the monthly payments will be for the fixed period.

At the end of the fixed period the mortgage will most likely revert to the lender’s standard variable rate (see below). The borrower should plan carefully for this change as it may lead to an increase in interest and monthly payments.

Variable rate mortgages

‘Variable’ is a generic term that covers tracker, discount and standard variable rate mortgages.

Standard variable rate

Most lenders have a standard variable rate (SVR). This is their full price mortgage. The interest rate they charge is usually a few percentage points higher than the Bank of England base rate of interest i.e. the interest rate it charges other banks to borrow money.

So if the Bank of England base rate goes up by 0.5% then the lender’s SVR will probably also increase by 0.5%.

Discount rate

This is an introductory offer for the first two to five years of a mortgage in which the interest rate on the mortgage is lower than the lender’s SVR.

For example if the lender’s SVR is the Bank of England base rate plus 5%, then for the first two years the discount rate might be the Bank of England base rate plus 4% – a discount of 1%.

Offset mortgage

An off-set mortgage is one in which the borrower is charged only for their net borrowings. For example if the borrower has a mortgage of £100,000 but also has savings or investments of £10,000 then they will only be charged interest on £90,000.

Naturally, the lender has to have all their borrowings, savings and investments with the same bank. This usually gives the borrower a great deal of flexibility in terms of the size and frequency of mortgage payments. However the borrower does need a clear plan for repaying the mortgage and, very often, a strong sense of self-discipline as there might be no imposed repayment schedule.

Repayment mortgage

A repayment mortgage is one in which the amount borrowed as well as the interest accrued is repaid over the lifetime of the mortgage.

Interest only mortgage

With this mortgage the borrower only pays the interest accrued each month. This eases cash flow during the lifetime of the mortgage. However it does mean that the borrower must have some form of investment to pay off the borrowed sum at the end of the mortgage.

Information you may need to provide

Once you are clear on the purpose of the mortgage and what type best suits your needs, you are almost ready to get a quote. In order for a mortgage broker to provide you with an accurate quote you will need to provide specific information relating to you and the property you intend to buy.

Value of property and loan amount required

The asking price of the property is used to calculate the quote. It is not until you proceed with the purchase that this value will have to be confirmed by a survey.

The broker will also need to know how much you want to borrow. This will identify how much of a deposit you have and what the loan-to-value is.

For example, if the property asking price is £100,000 and you have a £10,000 deposit then you will need to borrow £90,000. From this the loan-to-value can be calculated as 90%.

Purpose of the mortgage

Lenders will have different criteria depending on the purpose of the mortgage. For example a higher deposit is usually required for an investment property than for primary residence.

Hence the broker will need to know the purpose of the mortgage in order to provide a quote.

Other details

Finally, the broker will need a few other pieces of information including the following:

  • Have you found the property? This gives an indication of how serious you are about purchasing
  • Are you a first time buyer? Some lenders will prefer first time buyers, other will not want to deal with them. Hence the broker needs to know this when searching for the best lender
  • Proof of income/ Credit record. When lending money the lender will want to know that you are likely to be able to pay it back. Proof of income and credit information will be required in order to assess this.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

For more information or to apply

To apply or find out more information, speak to a Barclays Wealth International Mortgage Adviser. They specialise in providing residential and investment mortgages for property purchases in the UK, Jersey, Guernsey, Isle of Man and Gibraltar.

Call us on +44 (0)1624 684305

Visit the Barclays Wealth International website

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If your loan is denominated in a currency other than sterling CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.

Terms and conditions apply to all mortgage products. We strongly recommend that you obtain your own independent tax advice before proceeding with an offshore mortgage.

Barclays Wealth will require a first charge over the property.

Barclays Wealth is a responsible lender and when considering your application for borrowing, your financial circumstances will be appraised. Remember should you run into difficulties please contact us immediately.

In all forms of advertising and marketing material where repayments are quoted, we will show clearly a typical Annual Percentage Rate (APR). We will also clearly indicate in all lending-related advertising issued in Jersey that we abide by the Code of Practice for Consumer Lending.

Lines are open 7am to 8pm weekdays and 8am to 5pm weekends and UK bank holidays, local time. Call charges may vary. Please check with your local telecoms provider. Calls may be recorded for training and security purposes.

The products and services described on this page are provided by the following companies, which are part of Barclays Wealth: Barclays Bank PLC in England and Wales, Barclays Private Clients International (Gibraltar) Limited in Gibraltar and Barclays Private Clients International Limited in the Isle of Man, Jersey and Guernsey. For further information on these companies and Barclays Wealth please read the Important Information.

Products and services on this site may not be available in certain jurisdictions. In particular, these products and services are not being offered in Japan or the United States or to US residents. For full details of exclusions and disclaimers please see the Important Information before proceeding. Each Barclays Wealth company reserves the right to make a final determination on whether or not you are eligible for any particular product or service.

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