Frequently Asked Questions

What is a repayment mortgage?

A repayment mortgage is a mortgage contract under which the customer is obliged to make payments of interest and capital which are designed to repay the mortgage over the stated term.

As long as you keep up the payments, the whole loan will be paid off over the term of the loan.

We always remind our customers that it’s important to think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

What is an interest only mortgage?

With this type of mortgage you borrow for a fixed period of time, but your monthly payments only cover the interest on the loan. That means at the end of the term you must pay off the capital in one lump sum.

It is your responsibility to build up savings, usually through some form of repayment vehicle, so you have the money you need to repay the capital (the amount you borrowed) at the end of the term.

What is a Flexible Mortgage?

Flexible mortgages are designed to allow you to make extra payments whenever you want to and benefit immediately. Some also let you reduce your payments or take a payment holiday.

Another variation is the “all in one mortgage” where you have your current accounts and savings with your mortgage lender. Your mortgage interest and monthly payments are then worked out based on your mortgage balance less the balances in your current and savings accounts. The higher your savings, the less you pay for your mortgage, although you don't then receive interest on those savings.

We always remind our customers that it’s important to think carefully before taking out a mortgage as your home may be repossessed if you do not keep up repayments on your mortgage.

What type of interest rate products are there?

Most lenders will be able to offer you different ways of paying interest on your loan. The kind of mortgage you choose will depend on which one you feel most comfortable with.

There are five main types:

1. Variable Rate

   Your payments go up and down as the mortgage rate changes (mortgage interest rates tend to move in line with the base rate set by the Bank of England, but there is sometimes a delay). Lenders set their own standard variable rates of interest.

2. Base Rate Tracker

   The interest rate varies (up or down) directly in line with the Bank of England base rate.

3. Fixed Rate

   The interest rate is guaranteed to stay at a set level for a set period, regardless of any changes in the base rate.

4. Capped Rate

   The interest rate varies but doesn’t go any higher than a set level, even if the base rate does go higher.

5. Discounted Rate

   Your payments are variable, but they are set at less than that lender’s standard variable rate for a period of time. At the end of the period, you are usually charged the lender’s standard variable rate.

How much can I borrow

The following indicative calculations may be used if you are either employed, self employed or wish to self certify your income.

Here is a quick guide:

If you’re a single applicant, multiply your income by 3.5

eg. Declared income £40,000 X 3.5 Maximum advance = £140,000

If you’re joint applicants you can choose one of two calculations, whichever suits you:

Option 1 example:
Applicant 1 income £40,000 X 3.5 = £140,000
Applicant 2 income £15,000 X 1.0 = £15,000
Maximum advance total = £155,000

Option 2 example:
Applicant 1 and 2 incomes combined = £55,000
Combined income X 3.0 = £165,000

Some of our lenders use different methods for calculating how much you can borrow and we may still be able to help if you need to borrow more than the above methods of calculation.

What can I use the cash from my remortgage for?

You can use the equity, or extra cash value, you have in your home for any purpose. You may want to make essential home improvements like a new kitchen or bathroom. You could build a conservatory or buy a new car. On the other hand, you may want to use the cash to pay off other, more expensive debts like store cards, credit cards and other loans. How you spend the money is entirely up to you - even down to treating the family to a well-deserved holiday!

What home insurance will I need to get with my mortgage?

You’ll need both buildings and contents insurance, but do shop around for the best deal. All lenders insist that you have adequate buildings insurance in place so that their security on the money they are lending is safeguarded. But you don’t have to buy it from your mortgage lender who may charge you up to twice as much as you’d pay elsewhere. If you buy it direct from a cheaper insurer, your lender may charge an administration fee (typically £25) for checking that the policy is adequate.

Do I need life assurance with a repayment mortgage?

You don’t have to buy life cover with a mortgage, but if you have dependants who would find it hard to pay the mortgage if you died, then you should buy a mortgage protection policy (sometimes called 'term insurance') designed to repay your mortgage in the event of your death. Also consider ‘critical illness insurance’ if it is offered as an add-on to the life policy. This pays out a tax-free lump sum if you are diagnosed as having one of a pre-defined list of serious diseases such as a heart attack or cancer.

Is there any other sort of insurance I need to buy?

You should consider mortgage payment protection insurance (mppi), which will pay your monthly mortgage payments, typically for up to a year, if you become unemployed or can’t work because of sickness or disability. It gives you a breathing space to get your finances back on track. So, if you can afford it, mppi is a safety net worth having, but it's not cheap. The monthly cost is likely to be around £3.50 to £5.50 for every £100 of your monthly mortgage payment. Also most mppi policies are pretty strict about what qualifies as a valid claim, so read the smallprint carefully to see it covers your needs.

Is it sensible to buy a property with friends rather than renting together?

It’s a big commitment to buy with friends and you should think long and hard before diving in. To go ahead, you need complete trust in each other and you all need to agree on issues like how long you plan to keep the property. Problems can arise if you fall out with each other or if one joint-owner decides they want to sell the property to release their share of the equity when the others don’t. Also, if one of the borrowers does not pay their share of the mortgage, the lender will be entitled to chase all of you for payment of the arrears. You should take legal advice on setting out your aspirations formally and on how the property ownership is set up.

My boyfriend and I want to buy a place together, but will we be penalised by lenders because we are not married?

No, whether you are married or not shouldn’t have any effect on the success of your mortgage application. But think hard before making such a serious financial commitment together, for all the reasons mentioned in the answer above.

How am I ever going to be able to afford a property? Can I take a mortgage out over, say, 30-40 years to reduce monthly repayments?

You may be able to take a mortgage over a longer term than the typical 25 years and this will reduce the monthly cost of a repayment mortgage. But it does mean that you will be chipping away at the capital debt more slowly and you will pay more interest over the term of the mortgage so it will cost you more in the long run.

What if I take out a mortgage and then things go wrong for me financially or I lose my job so I can’t afford the mortgage? Would I automatically lose my home?

No, lenders only repossess properties as a very last resort. If you find you can’t afford your monthly mortgage payments for whatever reason, the key is to talk to your lender straight away and explain the problem. Don’t leave things to get worse. Under FSA Guidelines, lenders are bound to be sympathetic and do their best to help you reschedule your payments until you get your finances back on track.

I smoke. Will that make it harder to get a mortgage?

No. Whether you smoke or, indeed, have any medical problems, shouldn’t have any impact on your mortgage application which asks no questions about medical matters. But it may well affect the premiums if you decide to take out life insurance.

I plan to buy a two-bedroom flat and afford the mortgage by letting one bedroom. Would the mortgage lender have any problem with this?

If you intend to let all or part of your property, you should definitely tell your lender, otherwise you may break the terms of your mortgage deed and risk being taken to court.

Read our glossary of mortgage related terms for further information.

	WRITTEN DETAILS AVAILABLE ON REQUEST. TERMS AND CONDITIONS APPLY. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. AIT Financial Solutions (UK) Ltd is authorised and regulated by the Financial Services Authority (FSA) to advise on and arrange mortgages and general insurance. The FSA does not regulate AIT Financial Solutions (UK) Ltd on unsecured personal loans, nor does it regulate us on some secured personal loans or some buy to let mortgages. In the case of personal loans and some buy to let mortgages we are licensed under the Consumer Credit Act 1974 to advise on and arrange these products. Our Consumer Credit Licence 527841. All rights reserved. Head Office: 48 Berkley Street, Charing Cross, Glasgow, G3 7DS AIT Financial Solutions Ltd is registered under the Companies Act 1985, no. SC236573.
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