The UK Mortgage Calculator is mainly intended for United Kingdom residents using the British Pound currency.
There are strategies to use in order to receive the most favorable mortgages in the United Kingdom (UK), especially for first-time buyers. It is usually very helpful when potential borrowers show good preparation for the process by bringing along all the information that may be required when applying for a mortgage at a bank, such as:
- addresses for the last three years, no gaps
- income information for the last three months, as well as three years of income records
- bank statements for the past three months, though it can help to have more
- documentation of loans or credit cards
On top of that, a good second step is to check credit scores, and raise any questionable negative marks with the banker that issues the mortgage. Assuming good credit in the UK, it is still possible to borrow with a relatively small down payment, according to the London-based financial information service Moneyfacts. There are many mortgage loan products requiring deposits of 5% or less of the property value, though it can change accordingly with market conditions.
Most banks in the UK favor variable-rate mortgages in one form or another. There are a wider variety of mortgages of this type in the UK than there are available in the U.S. For example, UK banks offer a number of kinds of tracker mortgages, which are basically a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they follow the movements of other rates, the most common which is the Bank of England base rate. Some mortgages start out as trackers and after a few years become standard variable-rate mortgages.
As Moneyfacts points out, introductory tracker rates can be among the lowest mortgage interest rates available. However, like all variable rates they can go up as well as down. Also, most introductory tracker rates will likely have an early repayment charge when remortgaged or repaid during the introductory period. Borrowers with a lifetime tracker mortgage can expect to see early repayment charge for a period after taken out.
Another unusual type of UK mortgage is the flexible mortgage which allows the ability to overpay, underpay, or take a payment holiday from a mortgage from time to time. The overpayment feature can be used to pay the loan down faster, either in lump sums or as part of the regular payment process. The underpayment feature is used to make lower monthly payments from time to time, and payment holidays can be used to avoid payment for brief stints, sometimes up to six months. However, these features usually come with special charges and conditions, so shop around carefully and compare the costs of flexible mortgages.
A unique aspect of mortgages in the UK is stamp duty, which is a tax that is charged as a percentage of purchase price when property is bought. Depending on the price bracket that the property falls in, the percentage can vary:
Regarding purchases on or after 22 November 2017, special rules apply for first time buyers and if the purchase price is £500,000 or less. Stamp tax is not applicable for first time buyers of properties worth £300,000 or less and the existing rate of 5% will apply between £300,000 and £500,000. Properties over £500,000 follow the same rules as buyers not buying for the first time.
There are other special rules that apply in regards to stamp duty in the UK, such as higher rates for additional properties and different rates in different countries. Furthermore, special rules apply in specific instances including the replacement of a main residence, when corporate bodies or shared ownership properties are involved, when buying six or more properties in one transaction, for multiple transfers between the same buyers and sellers, and many more. Stamp duty can be complex and it is best to consult professionals to determine the precise rate that will be charged on any property purchase.