Finding Police Mortgages aren’t always as simple as it seems. Never more so for finding the time to get it sorted, with irregular hours and working shifts.
Whilst the key worker mortgage initiative is no longer available, certain professions can still get access to preferential mortgage rates due to their profession. If you work in the police force, it could be that you have access to preferential police mortgage rates with certain lenders.
Getting A Deposit
One of the main requirements of getting a mortgage is the deposit and police mortgages are no different. Typically, you need at least a 10% deposit against the price of the property. In absence of the key worker mortgage initiative, there is still the Help-to-buy scheme available where only 5% deposits are needed.
The greater the deposit, the lower your loan-to-value (LTV) ratio. An LTV ratio is a percentage that represents how much of the property price is covered in the mortgage. For example a £250,000 property with a £25,000 deposit is a 10% deposit and 90% LTV. The lower your LTV, the lower the interest rate you’re likely to be eligible for. A 70% LTV will secure a lower interest rate than a 90% LTV, so it pays to have a good deposit.
Understanding What You Can Borrow
Typically, lenders will allow you to borrow 4-5 times the applicants salary, but this is based on a number of factors, including the price of the property and the LTV, your income and your credit rating. It’s best to contact and independent mortgage broker to find out in the first instance.
Types of Police Mortgages
The two main types of mortgages are capital repayment and interest-only mortgages, these are also applicable over police mortgages.
Repayment mortgages are where you repay the capital and interest at the same time in your monthly repayments. This is more popular, as whilst monthly payments are larger, it means you’ll have paid off the mortgage at the end.
Interest-only mortgages are where you only repay the interest on the mortgage. Once the mortgage term ends, you’re still required to repay the amount you have borrowed.
There are then fixed rate, variable rate and tracker mortgages.
Fixed rate mortgages are contracts entered over 2-5 years (sometimes longer) where you pay the same amount every month, regardless of interest rate changes. This is good if you want to be sure of how much you’re paying every month for a set period of time. Also if interest rates rise, you continue to pay the same amount. In contrast, the downside is you may pay more should interest rates come down. Also, if you want to get out of your agreement before the contract ends, there are usually Early Repayment Charges (ERC’s) to be made.
Tracker mortgages are where the amount of interest you pay tracks the Bank of England base rate. These are good if you expect interest rates to stay low, but need to be sure you can make repayments if they are to rise. Assuming the base rate is 0.75%, a lender will apply a fee. Should the fee be 1.25%, you pay 2% interest on your mortgage. Should base rates rise to 1%, your interest rate rises to 2.25%.
Standard variable rate (SVR) mortgages are the basic mortgage a lender offers. SVRs go up and down, often in-line with the Bank of England base rate, but doesn’t ‘track’ in the same way as tracker mortgages. The rate is based on other factors. Say the Bank of England base rate increased, it doesn’t necessarily mean your SVR rate would either, or at least by the same amount.
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