Barclays

Mortgage advice - general

This guide will introduce you to the most important elements of a mortgage and help you find one that best matches your needs.

You might also want to see our guide to getting a mortgage quote or information on specific mortgages such as buy-to-let, fixed rate or variable rate.

Special characteristics of a mortgage

A mortgage is a long-term loan that is secured against the property you are buying. So if you fail to keep up payments on your mortgage, the lender can take your property and sell it to recover the outstanding debt.

How much can you borrow?

The amount you can borrow will depend on your personal circumstances and the type of mortgage you require. In each case, the Barclays International specialist mortgage team will ask a series of questions to help determine which mortgage would be most appropriate for you, and how much you could afford to borrow.

Residential mortgages
A residential mortgage is used to buy a property in which you, or a member of your family, will live. When calculating how much to lend you, the bank will take into account your overall earnings and financial position. As a result, the deposit required is from around 10% of the asking price of the property. This is considerably less than would normally be required for buying an investment property or second home.

The amount you can borrow will depend on your individual circumstances.

Investment or buy-to-let mortgages
If you are buying a property in the UK to let out to tenants, you will need a buy-to-let mortgage. When considering how much to lend, the bank will usually base its calculation on the likely revenue to be generated by the rental income.

As a general rule, the property will need to generate 125% to 135% of the monthly interest payments on the mortgage. So if the interest on your mortgage is £400 a month then the rental income will need to be at least £500 to £540. The likely rental return would need to be independently verified.

Most buy-to-let mortgages are interest-only, so the calculation is based on the monthly interest. Many property investors prefer an interest-only mortgage as it allows them to use their capital to invest in more or bigger properties. But if you want to, you can arrange to repay the capital as well.

Fixed versus variable rate mortgages

The interest charged on a fixed rate mortgage does not change. Usually the fixed rate period is for the first two to five years of the mortgage, but Barclays International clients may be able to get longer fixed rate periods.

Variable rate mortgages have interest rates that can change each month. The main types of variable mortgage are discussed below.

We also have separate guides on fixed rate mortgages and variable rate mortgages.

See our current mortgage rates.

Standard variable rate
Our standard variable rate (SVR) mortgage is flexible, there is no arrangement fee and usually has no early repayment charges.

The interest rate is based on the Bank of England base rate. When the base rate goes up by 0.25% then the SVR will probably do the same. However, unlike a tracker mortgage, the lender is not obliged to change the interest rate on an SVR.

Discount rate (subject to availability)
This is the SVR but with an introductory period of a couple of years during which the interest charged is lower. In return for this discount, a degree of commitment is required. So there are early repayment charges if you repay ahead of schedule.

Tracker
The Barclays International tracker mortgage tracks the Barclays Bank Base Rate (BBBR) of interest, but can vary from this. There are no early repayment charges on this mortgage so you can repay large sums if you want.

Capped (subject to availability)
This limits how high the interest on a variable mortgage can go. It provides some reassurance that your monthly payments will not go above a certain point.

Mix-and-match mortgages
With a mix-and-match mortgage, clients can choose a combination of features to suit their needs.

For example, you could have an extended fixed rate mortgage for as long as 10 years, or you could combine the benefits of both fixed and variable mortgages into one package.

Find out more about our mix-and-match mortgages.

What's the best option - fixed or variable rates?
A fixed rate mortgage is predictable. This can make it easier to budget but you won't benefit from any drop in interest rates. So you have to decide if you are better off with predictability, or if you could cope with interest rate rises should they occur.

By explaining your preferences and circumstances, our mortgage team will be able to help find the mortgage structure that's right for you.

Early repayment charges
These are charges made if you overpay on your mortgage during a fixed period such as a discount or fixed rate mortgage.

Our tracker and SVR mortgages are usually free from early repayment charges. As a result they are particularly popular with people whose income can be unpredictable.

Replacing a fixed term mortgage

If you have a fixed term mortgage but want to replace or clear it, then you will probably incur early repayment charges. You may want to get a mortgage with greater flexibility or one that has lower interest charges.

But would it be worth replacing the mortgage before the fixed period is complete?

You need to decide if the benefits would outweigh the costs. The costs include:

• Early repayment charges
• Legal arrangement of transferring the mortgage.
• Lender's arrangement fees
• Valuation costs for a new lender

Generally speaking, the less time left on the fixed period, the less likely that it would be worth replacing the mortgage early.

Foreign currency mortgages

A foreign currency mortgage allows you to match the currency of your mortgage with that in which you receive your salary or other income. This can help reduce the cost of currency exchange and transfers.

More experienced borrowers might consider placing the mortgage in another currency overseas in order to benefit from a lower interest rate there. However, there are significant risks attached to this, so it is not for everyone.

See our guide dedicated to foreign currency mortgages.

Offshore mortgages

Barclays International can place mortgages in offshore jurisdictions such as the Isle of Man.

Offshore status can be applied to most mortgage types and structures. However, you may not benefit from an offshore mortgage if, for example, you are a British citizen. So you will need to seek professional tax advice.

Barclays International is happy to make introductions to our preferred tax advisers, Ernst and Young.

Fees and costs

As well as the early repayment charges, the costs that you need to take into account include:

• Application fee. The lender's administration and set-up charge.
• Valuation or structural survey. A report that confirms the value and, if required, structural integrity of the property. Barclays International offers three types of reports depending on your requirements.
• Final repayment fee. This covers the administration and legal costs when concluding the mortgage.
• Legal fees. A lawyer (solicitor or conveyancer) will transfer the legal ownership of the property.
• Searches. Often conducted by a solicitor, searches make sure there are no adverse construction or development plans that could affect the property.
• Taxes. Different types of purchase tax apply when buying property. For example, in the UK, Stamp Duty Land Tax will normally be charged on properties valued at £125,000 or more. You may also need to plan for capital gains tax or income tax, especially if you are intending to rent the property out.

Credit history

Most domestic UK lenders will run a credit check on potential borrowers to make sure that the borrower has a history of being able to manage debt. This can be a problem if you don't have any credit history in the UK.

Barclays International can take into account your overall international financial status, which may mean that we could offer you a mortgage when other lenders cannot.

Getting a good quote

When asking our specialist mortgage team for a quote, you will need to provide information about the mortgage you want, including:

• The purpose of the mortgage (residential or investment)
• The size of your deposit
• The repayment structure you want: e.g. variable, interest-only, etc.
• Your financial circumstances

To prepare fully for a conversation with a mortgage broker, see our mortgage quote guide.

Terminology

Here are some of the terms used in the property market:
Chain. In many cases a property sale can only proceed once the buyer has sold their existing home. A series of such people is called a chain.
Freehold. The permanent ownership of a property and the land beneath it.
Leasehold. The long-term letting out of a property. A mortgage can be obtained on a leasehold, providing it is long enough: e.g. at least 35 years longer than the mortgage term.
Loan to value (LTV). If a property is worth £100,000 and the mortgage granted is £90,000, the loan-to-value is 90%.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

If your loan is denominated in a currency other than sterling CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.

For more information or to apply

To apply or find out more information speak to a Barclays International Mortgage Adviser. We specialise in providing a range of residential/investment mortgages for property purchases in the UK, Jersey, Guernsey, Isle of Man and Gibraltar.

Call us on +44 (0)1624 684305†

Alternatively please contact your Barclays International Relationship Manager, if you have one.