Video: What Exactly Is A Mortgage & Other Frequently Asked Questions

In this week’s video, Ben and Joe talk answer some frequently asked questions about mortgages such as what is a mortgage, what is loan to value and how does it affect your payments and how long does the typical mortgage last for. You can watch the video above or read below for the full transcript…

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Ben: What exactly is a mortgage? What does loan to value mean? And how does it affect your mortgage payments and typically how long does a mortgage last for?

We’re going to answer some of these frequently asked questions in this weeks video.

Hi, I’m Ben from Hannells and I’m back again with Joe, one of our expert in-house mortgage advisers and in this video we’re going to address some of the industry jargon when it comes to property and in particular, mortgages.

So Joe, let’s take it back to the very basics. What exactly is a mortgage?

Joe: So Ben, a mortgage is a really big loan that helps you buy a house, it’s probably the biggest loan that anyone will ever have. A personal loan is there to help you buy whatever – do home improvements, buy cars etc. What the difference is a mortgage, except for being a lot more money, is the fact that a loan is actually physically tied to the house that you’re buying. So if you look on your mortgage deeds, when you finally buy your house, so your house deeds, it will actually say the mortgage lender that’s associated to your house.

Ben: OK, yeh quite simple but I think that helps clear it up. So the next one that we use quite often and just assume everybody knows because we’re in the industry is “Loan to value”. So what do we mean when we’re talking about, when it comes to mortgages, “Loan to value”?

Joe: Yes, this is quite a common thing. I think a lot of people assume that clients know what “Loan to value is”, it’s not the case. So loan to value is the amount of loan that you have compared to the value of your property. So, let’s assume that your house is worth £100,000 and your mortgage is £75,000. That means that your loan to value percentage is 75%.

Now the more loan you have compared to the value of your house, the higher the intertest rate typically. Meaning that your mortgage payments will be more. And this is on the flip side from a clients point of view, this is where your deposit comes in to play.

So when people band around a 10% deposit or a 5% deposit, as a mortgage adviser we look at it the opposite way so we look at 95% and 90% is what you’re borrowing from a mortgage company.

Ben: And typically based on your experience Joe how long does the average mortgage actually last for.

Joe: So typically the longest amount of time that you can take a mortgage for is between 35 and 50 years lender dependant. Some will do 40 the maximum time, some will do 35. You need to make sure that you’re mortgage is paid off before the age of 70. That’s what the mortgage lenders will set as their “retirement age”.

Now that is again dependent, there are exceptions. People can take it into retirement but again that’s lender specific and client specific so that’s where you need to sit down with an adviser and work out if its doable for you.

Ben: So why does everybody then not take out the longest possible mortgage to keep their payments down throughout that term?

Joe: It’s a very good question Ben and it’s one of them things where it is specific to the person. Some people want to have a smaller mortgage payment so that they can do more things. Others want to be able to pay their mortgage off as quickly as possible so it is client specific. It’s always good to sit down with someone and go through what’s right for you and your monthly budget.

There’s no point crippling yourself with a monthly mortgage payment that’s really high if you know that you go out a lot and do a lot of activities whereas other people might be able to do that.

One good thing about mortgages is that you can make over-payments. So, I your mortgage is actually smaller on a monthly basis, you can make an additional payment towards the payment if needs be.

You’ve got to remember that if you’re taking a mortgage for as long as possible you’re going to pay a lot more interest back then if you were having a shorter term mortgage.

Ben: Ok brill, thanks Joe. So in this video we’ve talked about what exactly is a mortgage? What’s loan to value and how does it affect your payments? And typically, how long does the average mortgage last for?

Now if you’re a first-time buyer and you’ve not had any financial advice and you have questions that you’d just like to have an impartial chat with someone in the know – come and speak to us at Hannells where you’ll have the opportunity to speak to somebody like Joe or one of our other, expert, in-house mortgage advisers who can give you the best possible advice and point you in the right direction.

You can reach us at hannells.co.uk, you can drop a comment below or send us a message and we’ll be happy to help.

So thanks Joe as always for again, providing some of your mortgage expertise, thanks for watching and we’ll see you on the next one.

If you have any questions or concerns about mortgages or property, or maybe you’ve got a suggestion for a topic you’d like us to cover in a future episode, please get in touch with us at Hannells at enquiries@hannells.co.uk.

And if you’d like to arrange a chat with one of our expert, in-house mortgage advisers just complete the short form >>HERE<<

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