Guide to Mortgages
Here at Chorley Building Society we want to make the process of obtaining a mortgage as easy as possible. The information below explains some basic points about mortgages and the process you will go through when applying for a mortgage with us.
Key Steps in the Mortgage Process
- Initial mortgage interview with one of the Society's qualified mortgage advisers - this will give you a basic understanding of how much you can afford to borrow
- Choose a property and make an offer
- Once your offer is accepted by the seller, make a full mortgage application and select the type of mortgage product and repayment method most suitable for your needs
- Appoint a solicitor to act on your behalf during the purchase
- A valuation and survey will be carried out and the report assessed by both you and your mortgage adviser
- Chorley Building Society will make a full status and affordability assessment to determine whether it can offer you a mortgage
- Receive and sign the mortgage offer
- Exchange and completion - your solicitor will agree a date for exchanging contracts with the seller's solicitor. At this time you pay your deposit and upon completion the property is legally yours
- First Repayment Letter - you will receive this shortly after completion and this will detail important information such as when your mortgage payments will be due and how much these will be.
Some of the key steps are described in more detail below.
Mortgage Interview
The mortgage interview will be conducted with one of our qualified and experienced mortgage advisers. This can be done face to face in any of our branches or over the telephone. This will provide you with all of the information you need to be able to make an informed decision about your mortgage choice.
The adviser will need to talk through your current circumstances so that they can establish a number of things such as which mortgage product and repayment method is most suitable for you, how much can you afford to borrow and your insurance requirements.
During the interview the adviser will ask you to provide various pieces of information. If you are employed you will be asked for:
- Your last 3 wage slips,
- Your last 3 months personal bank statements
- 2 forms of identification
- Details of any outstanding credit
- Previous mortgage statement (if applicable)
If you are self employed you will be asked for:
- Your last 3 years audited accounts
- Your last 3 months personal and business bank statements
- 2 forms of identification
- Details of any outstanding credit
- Previous mortgage statement (if applicable)
- In some cases a detailed assets and liabilities statement.
We ask that during the interview you disclose all relevant information to the adviser as a full credit search will be done later in the process.
You will have direct contact with your mortgage adviser from the initial interview through to completion and they will be on hand to answer all of your questions throughout the process.
How much can you afford to borrow?
Your mortgage adviser will ask you to complete a budget planner and will talk through this with you. Your mortgage payment is likely to take a big portion of your monthly income and so it is important that both you and the mortgage adviser are happy that the amounts in the budget planner and the amount you are borrowing are realistic and manageable both now and in the event of changing circumstances in the future, such as an increase in interest rates.
Types of Mortgage
Our mortgage advisers will be able to talk you through the various features of each type of mortgage and will ask you to consider what features are most important to you. For example; do you want to have fixed monthly repayments? Do you want to make overpayments? By answering these questions it will be possible to select the mortgage product that is most suitable for you.
Mortgage Products
There are three main types of mortgage products and the features of each are explained below..
Variable Rate Mortgage
The rate on this type of mortgage is variable and can increase or decrease at the discretion of the lender. There are no limits as to how often a variable rate mortgage can increase or decrease.
Discount Mortgage
The interest rate on a discount mortgage is also variable but is discounted by a set amount from the lender's standard variable rate for a period of time. If interest rates increase or decrease during the period of discount the mortgage rate will change but the agreed discount will be maintained. When the discount period comes to an end the mortgage will revert to the Society's Standard Variable Rate. A discount mortgage gives the benefit of reduced payments in the first few years of your mortgage.
Fixed Rate Mortgage
As suggested by the name, the interest rate on a fixed rate mortgage is set at a specified rate for a set amount of time. At the end of the fixed rate period the mortgage will revert to the Society's Standard Variable Rate. This type of mortgage is excellent for those who want to know exactly how much disposable income they have left each month, and by giving certainty of monthly payments provides peace of mind and stability.
Methods of Repayment
There are two main methods of repaying your mortgage which are described in more detail below.
Capital & Interest Mortgage (also known as a capital repayment mortgage)
With this type of mortgage you repay part of the capital each month plus interest on the outstanding amount over an agreed number of years so that at the end of the term the mortgage will be repaid in full.
Interest Only Mortgage
An interest-only mortgage is a loan in which, for a set term, you pay only the interest on the mortgage principal balance and the mortgage principal balance remains unchanged. At the end of the mortgage term the mortgage principal balance will need to be repaid and you will need to select a repayment vehicle to achieve this. It is important that payments are maintained into the repayment vehicle so that it achieves its purpose of providing the means for you to repay the principal (sometimes referred to as the capital) balance at the end of the term. This method of repayment does not provide certainty that the mortgage will be fully repaid at the end of the term and so you must ensure that the method you have selected for the repayment of the mortgage principal balance is suitable for the purpose.
Our mortgage advisers will be happy to discuss the best product and method of repayment for you and can answer any of your queries. To discuss any of these points with them please call 01257 235001.
Insurance
During your mortgage interview the adviser will talk to you about your insurance needs. They will discuss the importance of Accident Sickness and Unemployment cover and will be able to provide you with a quote for this. This type of insurance protects your mortgage payments for a set period of time in the event of accident, sickness or unemployment. For further details of the benefits of this type of cover please look at the Insurance section of the website.
The adviser will also discuss Buildings and Contents insurance with you during the interview. This type of insurance will protect your home and contents from certain perils such as fire, flood or theft. One of the conditions of your mortgage will be that buildings insurance is maintained for the life of the mortgage and the adviser will be able to provide you with a quote for this. The Society's insurance cover is provided by RSA.
Property Valuation
We will arrange for a qualified valuer to carry out a valuation for you so that we both know the current value of the property and that it is a suitable security.
Once you have made an offer on the property and completed your application form the adviser will ask what type of valuation you would like. It is possible to request a basic valuation report. This is a limited report and the valuer arrives at a value by comparing the property with similar ones, taking factors such as age, condition and location into account. The valuation also points out any very obvious major faults which could affect the property's value, but is very brief and is not nearly as informative as a more detailed survey.
The more popular option and the one that we would strongly recommend is the Homebuyer Report and Valuation. This is a much more detailed report and includes more information about the condition of the property. It is generally split in to the following sections:
- Introduction to the report
- About the inspection
- Overall opinion and summary of the condition of the property
- About the property
- Outside the property
- Inside the property
- Services
- Grounds (including shared areas for flats)
- Issues for your legal advisers
- Risks
- Valuation
- Surveyor's declaration
The report will also include a number of appendices which provide useful information about what you as the purchaser needs to do next and, particularly in the case of leasehold properties, any enquiries that legal advisers need to make prior to exchange of contracts.
It is also possible to request a building survey (also known as a structural survey) to be carried out. This is the most comprehensive - and the most costly - type of survey. It is suitable for any building, but is especially recommended for older buildings (75 years and upwards); those constructed out of unconventional materials such as timber or thatch; and properties which have had lots of alterations or extensions, or which you intend to alter or renovate.
Our valuation fee scale can be found on the mortgage section of the site and our advisers will be able to assist you with any queries you may have about this stage of the mortgage process.
Legal Process
You'll need a solicitor to carry out the legal side of things - local searches, drawing up contracts and other legal matters relating to the purchase. When completing your application form you will need to advise which solicitor you are using. Our mortgage adviser will be able to recommend a solicitor for you if required.
Once the solicitor has undertaken all of their work they will request the funds from the Society and agree a date to exchange contracts so that completion can then take place.
Following completion of the mortgage you can move into the property. We will write to you to confirm when your monthly payments will need to be made and how much these will be for.