Mortgage £700,000 – What Are The Repayments?

The property market rises and occasionally falls, but the long-term overall trend is generally upwards, and this is especially the case in more expensive urban areas such such as London. Whilst the average UK mortgage sits at around £184,445, some mortgages for premium homes can rise well beyond that, up to heights requiring amounts like a £700,000 mortgage or even greater. But what would the mortgage repayments on a £700,000 mortgage look like?

Here we outline how these repayments on a £700,000 mortgage might look, including the types of mortgage available, how much deposit you may need to put forward, and more.

How much are £700,000 mortgage repayments?

The typical monthly repayments on a £700,000 mortgage depends on a number of factors including:

• Mortgage length – The mortgage term will dictate how much you pay per month. The longer the mortgage length, the more the payment is spread out. Whilst this has the advantage of being more affordable, there are two key aspects to consider — the age limit set by most lenders of 70 75, plus the higher the interest payments overall when the term length is longer.
• Interest rate – There are two types of interest rates – fixed rate and variable rate. Depending on which you choose, you may end up paying more or less overall as rates can fluctuate.
• Mortgage type – Whether you go for the standard repayment mortgage, or you go for an interest-only mortgage. Usually an interest-only mortgage is rarely a good choice at such a high principal amount.

The following is an idea of how much the average monthly repayments would be, using 4% – 6% interest as a benchmark:

What factors affect the monthly repayments of a £700,000 mortgage?

A mortgage of this high value will always come with higher monthly payments. That being said, the following are some factors that will influence just how much you’ll be paying:

• Interest rate type – Two types of interest rates will dictate how much you’ll be paying each month.
  • Fixed-rate – A fixed interest rate works by agreeing to a set rate for a period of your mortgage length, such as 2-5 years. This has both advantages and disadvantages. For one, you are protected from unexpected interest rate hikes that may come with variable rates, but you also cannot take advantage of any dips. It’s also worthwhile pointing out that a fixed rate will likely initially be higher than the variable rate interest.
  • Variable rate – Variable rates can offer lower interest rates initially, and perhaps throughout the length of the mortgage term. However, it’s worthwhile noting that despite the likelihood of lower monthly repayments, there’s still a chance you’ll pay more.
• Mortgage lengths – Typically, a mortgage length is around 25-30 years. However, for a sum as high as a £700,000 mortgage, many may opt to go even higher, up to 40 years. First-time buyers especially prefer these years, as it gives them more security. However, as we said before, the longer the length, the higher your overall interest payments – not to mention the slower you gain equity.
• Mortgage type – The type of mortgage you opt for, meaning either a monthly repayment mortgage or an interest-only mortgage, goes a long way in determining how much you’ll pay per month. An interest-only mortgage usually offers lower repayments, however, with a principal as high as £700,000, the interest-only payments will likely be far too close to the price point of a repayment mortgage to make economic sense.

How do I get a £700,000 mortgage?

Getting a £700,000 mortgage will require extensive checks via risk assessments and the like, as there is a large amount at risk on behalf of the lender. Nonetheless, the following are the three main things that determine the chances of your application process:

• Credit – Your credit history is one of mortgage lenders’ most known checks. Adverse credit is one of the big red flags that many lenders take as an automatic rejection without some serious positives offsetting it. Strong credit history signals to lenders that you have discipline, and you can be a reliable borrower, able to make mortgage payments on time.
• Income level – Higher income levels typically mean you’re eligible for higher borrowing capacity. Mortgage lenders usually have a practice of allowing at least 4 to 4.5 times your annual income.
• Loan to Value – Loan to Value is a ratio that describes how much deposit you’ve input versus the loan. So, for an LTV of 90:10, which is fairly typical, you’d be paying 10% of the property value in deposit. This lessens the amount you loan, thereby decreasing the risk, and increasing your equity.

What if my £700,000 mortgage application is rejected?

If your £700,000 mortgage application process fails, then the best possible option is to find yourself a mortgage broker. These are agents that act as middlemen between mortgage lenders and borrowers. When the Bank Says No is the UK’s leading mortgage broker company:

• Access to a wide range of lenders – Mortgage brokers have access to mortgage lenders that most people cannot contact directly. This is because many specialist finance lenders prefer to work through our broker matching service, which can pinpoint and find their exact clientele for their niche.
• Expert broker advice – A 700k mortgage is a massive investment, and requires careful consideration for how to balance affordability and overall costs. Brokers can help optimise certain facets of your investment, such as finding the right balance with deposits and which interest rate type (fixed/variant) to go with.
• Time-saving – We are well-practised at preparing documentation and plans for approaching mortgage brokers. This process, daunting for a newbie, will be second nature to a mortgage broker.
• Mortgage deal comparison – Multiple mortgage deals will be compared by the broker via the network of mortgage lenders at their disposal. This means that we will endeavour to find the best deal that fits your profile and ensures you achieve your property goals.
• Complexity streamlining – Some borrowers have income from multiple sources, and this can make it hard to secure a £700,000 mortgage, as lenders see this as unreliable. A broker, however, can present it in a way that the application process still meets lender requirements, or find specific lenders open to more flexible financial situations.
• Mortgage protection – Brokers can advise and arrange insurance products, such as life insurance, income protection etc. for any investment they feel could use safeguarding.

How can I improve my chances of getting a £700,000 mortgage?

A loan of this high value requires documentation and evidence that you are good to pay the capital repayment mortgage. Some of the ways you can do this are to:

• Improve credit history – Whilst your credit history cannot be written, you can work toward improving it. If you have adverse credit, you can do the following to try and offset this issue.
  • Pay bills – Pay your bills on time. Ensure that you reserve your funds mainly to pay off your essential bills, especially those on debit/subscription.
  • Consolidate debts – Getting all your debts into one place is essential for easy management, especially in cases where you are charged interest.
  • Check credit report – Your credit report is your credit history overview in detail. The reason why you want to order this, and regularly, is to spot and dispute errors within the report. This is not uncommon, and ironing these unwarranted black marks out can boost your credit score far beyond what it is.
• Maximise income – Sure, advising to get a promotion may be redundant, considering it’s not the easiest feat to pull off, but having additional income through overtime or a second job might be required if you’re to demonstrate financial stability.
• Larger deposit amount – If lenders see you as a significant risk, they may need you to lower the loan-to-value ratio by an extra degree. Whilst many require at least a 10% deposit, this can increase to as high as 30%.

Conclusion

The monthly mortgage repayments of a £700k mortgage are going to be fairly large, likely taking a considerable chunk of your annual income. That being said, many don’t realise the many advantages a borrower can take advantage of in the long term.

When dealing with a mortgage of their size, we always recommend engaging the services of a mortgage broker. Having an expert mortgage advisor in your corner can open up opportunities you may not even be aware of. When the Bank Says No is always here to help, from providing a mortgage affordability calculator to overseeing the application process that will net you the finance you need to secure your dream home.

FAQ: How do I make a 700k mortgage cheaper in the long run?

A £700k mortgage is a very high principal. This means that the interest being paid will take up a significant slice of each monthly payment. If we assume you would take up a 30-year contract with an interest rate of 4.5%, which is a relatively low interest rate, you could be paying up to £576,847 in interest alone. This is because 4.5% of the principal is added to each monthly payment as a tax for borrowing.

How you can minimise interest payments are as follows:

• Increase the initial deposit – As we’ve mentioned before, lowering the loan amount by paying a higher deposit thereby lowers the overall mortgage principal. If, for example, you were to pay £140,000 as a deposit (20%), you would pay approximately £461,478 in interest (assuming 4.5% interest).
• Shorter mortgage term – Your monthly mortgage repayment plan will be higher with a shorter term length, such as 15 instead of 30, almost doubling. That being said, you will be paying less than half of the interest payments overall with a 15-year plan, approximately £211,113 (versus £576,846). This is because you pay more and more of the principal and less of the interest over time, meaning the overall price drops quickly.
• Make overpayments – Overpaying your mortgage is a tactic that many use to lower their principal with any excess money left over, however, you have to take care when doing this. This is because few mortgage providers lending money want you to pay it off before the full length of the contract is up, as interest is how these providers make their money. Most lenders allow up to 10% of mortgage overpayments each year.
• Remortgage – Over time, as you build equity and hopefully improve your credit history/score, you can think about remortgage. This is particularly a good idea if you’ve been suffering underneath unfavourable mortgage conditions for a while. By remortgaging, you can access) better interest rates, and perhaps even lower monthly repayments overall.

FAQ: Should I use an online mortgage advisor?

An online mortgage advisor can be more convenient than a physical, in-person mortgage broker. This is because they provide more flexible access, with some being 24/7, allowing you to ask questions and find solutions at times that are convenient to you. Plus, you can access these services remotely from anywhere, eliminating the need to visit in person, and therefore making contact a lot more frequent if required.

Another big advantage to using online advisors is the fact that many of them are free. Many advisors get paid via commission, meaning that your only charge may be the mortgage itself. Furthermore, these individuals have tools that allow instant comparison between mortgage deals from various lenders, finding your specific criteria from their network of lenders, and being much faster about it, considering the nature of online documentation transfers.