Mortgage Bank

A mortgage bank is, as the name suggests, a specialist type of bank which deals solely in starting up and trading different types of mortgage loans. The way a mortgage bank will differ to a high street bank or building society in its services is because it sells its mortgages on the secondary financial market to other investors. This trading activity in combination with the fees a mortgage bank charges when it originates a loan is how the institutions makes money.

As a consumer it is unlikely that you will get the best mortgage rate directly from one of these banks as they generally do not deal with customers and usually only operate on the financial secondary market. Irrespective of whether you are getting your loan from one of these banks, a high street bank or a building society, the way you repay your loan does not change. If your mortgage bank sells your loan to another investor it also does not make a difference to your repayment plan or the need for you to make monthly payments. There is perhaps an argument to be made that you may get a better service from the odd mortgage bank that deals with customers as their operations revolve solely around mortgages and nothing else. However do not bank on this being true as in the grand scheme of things a mortgage bank is concerned with increasing profits first and foremost.

For consumers looking to get on the property ladder ultimately their concern should not be whether to get their mortgages from a high street bank, building society or a mortgage bank, it should be about getting the best mortgage deal you possibly can. Getting this deal will depend on the details of your mortgage and whether it is well matched to you. After some deliberation about the details of your desired mortgage like which interest rate option you want to go for and your repayment method, shop around to find out which financial institutions are offering the best deal. If it turns out to be a mortgage bank rather than a high street bank or building society, the application process you go through should not be any different.

Estimating Your Monthly Payments

Before you go into the application process however it is important to use a special online calculator which is designed to estimate the cost of mortgages. You can find these with a simple internet search and fill them out using information on the value of your property, the length of time it will take to repay your loan and the interest rate and deposit percentage of your mortgage. Once you have filled in these details you should get a good estimate of your mortgage's monthly payments.

This is an important step to take as if you go through the application process without any idea of how much your monthly payments will be, you could end up in a very bad financial situation. By applying blind you could end up underestimating your monthly costs and put in a position where you cannot meet your payments. The figures these calculators give are of course only estimates, so if you can only just meet the monthly payments that the calculator gives, it is best advised to not go for that particular loan. To be on the safe side you should always account for more money in your monthly payments than the calculator shows.

Application Process

After you have done this and have made your final decision you should start your application. When making your application, the financial institution you have decided to go with will require you to provide a few bits of key information to assess how likely you are to default on your monthly payments. This information will come from a few documents such as payment slips and perhaps a reference from your landlord or boss.

With this information your lender will then carry out some credit and reference checks as well as a final property valuation so they can estimate how much your property is worth and how much they will give you for it. The time it takes for your application to be completely processed is usually quite long and the personal checks that your lender will have to do on you is usually the most time consuming irrespective of the financial institution you have chosen to go with. Hopefully you should get some feedback from your provider relatively soon and get the verdict on whether your loan has been approved or not. Finally, if you feel your lender is mistreating you illegally or if you want to talk to someone in further detail about how a mortgage bank operates, you can contact the Financial Services Authority to see what measures are in place to regulate these banks.