What exactly is a mortgage quote?
There’s a lot of speculation around mortgage quotes. The phrase means different things to different people, so today, we’re going to explain the various documents and offers a ‘mortgage quote’ could relate to and what each one means.
There are three common types of mortgage quotes (as far as we’re concerned), ranging from a very loose estimation to a hard-and-fast loan offer from your preferred lender.
Online mortgage quotes (UK)
This version of the term is typically used in marketing. For example, mortgage lenders and brokers alike will vie for your business to get you interested in their products, suggesting various estimations of how much you can borrow. The ones that seem to offer the most money at the lowest cost will grab the most attention, obviously, but they’re not usually as realistic as they appear.
The simplest method suggests that you can borrow three or four times your salary, which, when you get down to the details, isn’t quite the case. For an accurate mortgage quote or estimation of how much you ‘could’ borrow, you won’t need to know how much you earn but how much you spend, too.
Online mortgage calculators
As official looking as they often appear, an Internet mortgage calculator usually delivers the best-possible-case scenario to get you interested in the provider’s services.
You fill the relevant fields with a range of information, including your salary, how much you’d like to borrow, property value, and deposit amount. Then, the calculator delivers what appears to be a quote of just how much you’ll be able to borrow.
Sadly, it’s not an accurate quote—it’s a very rough estimation based on a small selection of the necessary figures.
Why you need an affordability assessment
Whether you apply for a mortgage using a mortgage broker, direct with the lender, or with your bank, you’ll need to complete a mortgage affordability assessment. This assessment weighs all income streams against monthly outgoings to see what’s left and how much you can comfortably be expected to pay into your mortgage.
An assessment includes all loans, credit, utility bills, travel expenses, groceries, and more. It’s essential to create an accurate picture of your finances because if you fail to make your payments, you can lose your home, which is bad news for you, your family, and your lender.
A mortgage in principle
Our second ‘mortgage quote’ is an interim offer document that gives you some buying power when you start looking at houses you’d like to buy.
A mortgage in principle or agreement in principle (and occasionally a decision in principle) is based on the figures provided by your affordability assessment. This document shows estate agents and sellers that you’re serious about buying and that—as long as everything checks out—you have a provisional offer of the money to buy any property in your price range.
An agreement in principle usually requires a soft credit check, although it’s not always necessary, and they’re not too hard to acquire. If you apply online, you could have one in 24 hours, and once you’ve got one, it should last for up to 90 days.
The thing to remember about a mortgage in principle is that it isn’t a guarantee of money. Only a mortgage offer provides that.
A mortgage offer
A mortgage offer (or a formal offer) is also sometimes called a mortgage quote. At this stage, it’s a verified offer from a mortgage provider to lend you the money you need to buy a specific house.
With a mortgage in principle, you can find a house you like, put in an offer, and have it accepted. You then apply to your lender for a definite mortgage to buy the property. The lender carries out their checks—into you and the property—to ensure that their investment is safe and sensible and will deliver the expected return.
Receiving a mortgage offer can take up to 6 weeks, but sometimes as few as two. The lender needs proof of all the facts in your affordability assessment, such as payslips, bank statements, and proof of identity and occupation; the sooner you provide what they need, the sooner they can decide.
Here’s what a mortgage offer includes:
- Lender’s details
- Applicant’s details
- Date of the offer
- Property details
- Interest rate
- Mortgage term
- Monthly repayment amounts
- Terms about your commitment to the lender
- The penalties for failing to make repayments
How long does a mortgage offer last?
Offers vary from lender to lender but are usually between 3 and 6 months. If the offer expires, most lenders will happily review and renew it. Buying a house can get complicated, and the process often overruns, so lenders are prepared to work with you to get the job done.
An extension might include a change in rate, depending on any market changes or if your financial circumstances have changed since your initial application, for better or worse.
In conclusion – a mortgage quote can be many things
Once you start your house-buying journey, all of these terms will soon become second nature, and whatever stage you need to ‘get a mortgage quote’, there are lenders and brokers ready and waiting to help.
CLS Money has a wealth of experience providing every kind of mortgage for every type of buyer. We also offer some of the best rates on the market. So whether residential or buy-to-let, if it’s a standard application or if you need something from our specialist mortgages quote selections—we’re ready to help.
We’d love to discuss your options with you, whatever type of quote you’re in the market for.