Introduction to Mortgages
There are literary thousands of different mortgages available on the market, and although it is a well worn phrase, it is a mortgage maze. We genuinely have trained, helpful mortgage advisors available to talk to you to help you understand the various mortgage options open to you and the plus & minus points of each. If you help us to understand you personal circumstances, we will endeavour to obtain the best mortgage deal we can for you. It is important that any product you are interested in is fully explained as many may look attractive at first but lenders sometimes require fees and these can sometimes be quite high. Mortgages come in all shapes and sizes will varying terms, redemption penalties, incentives etc and lenders are always having to come up with new initiatives to tempt people ( particularly first time buyers) with their products. As well as mortgages, we can advise and supply re-mortgages, this is a fast growing sector of our business as many customers seek to obtain a better deal by obtaining a re-mortgage with another company. In recent years, fixed rate or term mortgages have been very popular and now that many of these terms are finishing, homeowners are finding themselves on a standard variable rate mortgage that is at a lot higher rate than they were expecting. We also have trained re-mortgage advisors and we would be delighted to assist you with any enquiry. We hope to receive an enquiry for you but below we have attempted to give you a brief understanding on some of the types of mortgage available at the moment..
Variable Rate Mortgage– The above term relates to a mortgage loan in it’s simplest form and is known as the lenders base rate. or standard variable rate loan. This type of UK mortgage quote will go up and down as and when interest rates are increased. When the bank of England monetary committee decide to raise the bank base lending rate, you normally find that within a short space of time, lenders raise their own lending rates. This type of UK mortgage quote does not provide a great deal of security and you have to be fairly confident that interest rates will not increase beyond your means. Most customers return to this type of UK mortgage quote after a fixed rate, capped or other incentive mortgage finishes. It is sensible analysing this using a mortgage calculator. In many circumstances, after a special deal mortgage has finished and you find your self on the standard variable rate, you can renegotiate a deal for another product, or of course you could allow us to do it for you. At this point we should mention that if you accept certain types of product from a lender and they specify a time, ie capped for two years, you will not be able to exit the deal until the end of the term without a penalty applying, before considering exiting a current mortgage deal, you should always endeavour to find out what penalties will apply. Fixed Rate Mortgage – A fixed rate mortgage provides you with the security that what ever interest rates are doing, your monthly payments will not fluctuate for the time that has been agreed by your lender. The interest rate is set at the outset and the period can vary from a few months to many years. It is sensible analysing this using a mortgage calculator. This is a great product for those that like to know what their monthly outgoings will be, it helps with budgeting and can provide a good deal of security. One of the disadvantages is that if mortgage rates go down, you will still be paying the fixed rate amount for the agreed period. However, many people believe that is better than having to worry about mortgage rate increases and of course if they do increase during the agreed period you will be saving money. At the end of the fixed period you will normally return to the lenders standard variable base rate.
Capped rate Mortgage capped Rate mortgages set a ceiling at which you monthly payments will not increase. They can be for a fixed period of time, usually up to 5 years. This type of UK mortgage quote gives you the security of knowing that what ever interest rates are doing, once you have reached the ceiling on your product, your monthly payments will not increase further. It is sensible analysing this using a mortgage calculator. It is sometimes possible to obtain a capped rate loan for the duration of the mortgage, however the product provider will usually insist that a collar is fitted to the loan so that if interest rates drop, you will not receive the full benefit.
Discounted Mortgages – These mortgages are quite popular amongst first time buyers and enable the early payments to be made at a discount to the standard variable rate. Setting up a home is an expensive business and initially money may be in short supply, by offering a discount on the rate, the mortgage provider is helping to provide financial assistance in the early stages of the loan. If interest rates increase so will your payments although the discount will remain the same. You can obtain discounted rates for up to 5 years. It is sensible analysing this using a mortgage calculator. This type of loan needs to be studied most carefully, there will normally be redemption penalties attached and some lenders may insist that at the end of the discount, you stay on their standard variable rate for a period of time. This loan is ideal if you want low initial payments but it may prove costly in the long run unless of course you are anticipating large increases in your salary.
Tracker Mortgages – Also known as base rate trackers, this type of UK mortgage quote rate simply tracks the bank of England base lending rate.. Typically the tracker will be set at a percentage above the base lending rate and usually will be at an amount lower than the standard variable rate. What ever the bank does, your loan will track it at the agreed rate even if interest rates are reduced.
Offset Mortgage – An interesting concept and a good bet for people with savings. A variety of products are available from a number of lenders. In essence you pay your monthly payments on your loan as per usual and then your savings attract a similar rate of interest. The two amounts are offset and you pay the balance. It is sensible analysing this using a mortgage calculator. Before handing your savings over to the lender though, you will need to check out what other interest rates are available as you may be able to obtain a better deal. Usually the savings are placed in a separate pot and you are free to take them at any time. In some case is it possible to substantially reduce your mortgage payments with this type of loan and you can end up paying the capital back at a much faster rate. This is a fairly complex mortgage that we will be pleased to explain to you.
Foreign Currency Mortgage – This is a mortgage where the loan has been provided in a currency other than in Sterling. Such loans require careful consideration and we will be happy to explain them to you. You need to be aware that Foreign exchange movements can be sudden and substantial and you must be able to tolerate a sizeable increase in the sterling equivalent of your loan. With this type of UK mortgage quote, you may be able to benefit from a lower interest rate abroad when interest rates at home are high but as mentioned, you will expose yourself to currency risk. In some cases in the past borrowers have found their mortgage debt has increased as a result of strong currency movements. It is sensible analysing this using a mortgage calculator. This type of loan is usually only considered by persons borrowing fairly substantial amounts. Although the debt is also paid off in the Foreign currency, this is done by you making applicable monthly payments in Sterling which are then converted into the currency your mortgage is in.
Cash Back Deals – This type of loan is aimed at first time buyers who can use the cash for a variety of purposes to help them set up a home. The lump sum is usually provided at the start of the contract but it can be at an agreed later date. As well as cash, you may be offered a package of benefits such as help with your legal fees. etc. It is sensible analysing this using a mortgage calculator. It is not un common for cash backs to reach five figure sums, but remember, the lender is going to want a fait amount of commitment from you before that part with often substantial amounts of money. You may have to agree to their standard variable rate for quite a period of time.
Self Certification mortgage – Ideal for the self employed person, this type of UK mortgage quote allows you to declare your income to the lender without having to actually come up with any proof. This type of deal also suits people who’s income is difficult to asses because of their working practices etc. This is a specialist sector of the market and we will have to explain it to you. Lenders criteria is usually tougher on this type of loan and you may find that only lower amounts can be borrowed.
Buy to Let Mortgage – Some say that buy to let property purchases having been propping the property market up for quite some time. This type of loan is used to purchase property for investment. There are now a wide variety of deals available on the market and most lenders now have a number of options available. We specialise in buy to let mortgage deals and have experts waiting to assist you. Some lenders will only consider the rental income when offering a deal others will allow you to include your own salary in the calculation. When considering a buy to let mortgage proposition, you may be asked to answer additional questions as to the property type, it’s location and it’s suitability to renting. Before requesting a loan for this type of project, always take in to consideration additional expenses such as the cost of the upkeep, letting agents fees, insurance for buildings and contents and service charges and ground rents, particularly if the property you want top purchase is a flat.
Holiday Home Mortgage – Again this is a specialist sector of the market that we will be pleased to help you with. Borrowing money for holiday home purchase is becoming more and more popular. This type of investment has tax advantages over normal buy to let particularly when you come to sell the property. As well as hopefully providing you with an income, you get to stay in the property for your holidays. Certain rules apply for you to be able to claim tax benefits and your accountant should be able to help you with these.
100% Mortgage– This type of loan covers the full value of the property and you do not need to put down any deposit. This product is very popular with first time buyers who do not want to save up for a deposit. It can help you get on the property ladder quickly and at a time when property prices are increasing at an alarming rate, it seems a good idea. These loans are now available to persons with a bad credit history and in some cases for re-mortgages as well. The only problem with a 100% mortgage loan is that if property prices start to fall, you will end up owing more than the property is actually worth. This negative equity feature has to be born in mind and may effect your ability to move home.
Repayment MortgageThe traditional form of mortgage payment at the end of the period (usually 25 years) all of the money has been paid back. Each month you pay off interest and capital, in the early years the amounts paid off are small but over time, the interest payments become smaller and the capital pay off becomes bigger.
Endowment – This used to be a very popular method of repaying your mortgage but in recent years, it has hardly been used mainly because of the dad publicity surrounding the product. In theory it is a good idea and when these products were first introduced, interest rates were high and it was hoped that by paying your monthly capital payments to an insurance company or endowment product provider to invest, greater returns could be achieved. At the end of the loan period, the endowment would mature, pay off the loan (up until the end of the term you would be paying the interest only) and there would even be an amount of money left over for you to enjoy. Alas in recent years, investment returns and interest rates have been low and the amount of money that has built up in a substantial number of endowments has not been enough to pay of the amount of the loan. There has been a lot of bad press about this product and many people believe that they were victims of incorrect advice.
Interest Only – Under this arrangement, you simply repay the interest on the loan only, the amount you owe does not reduce. This type of deal is favoured by persons expecting strong capital appreciation in the property, often they are landlords that hope to be able to sell the property in a number of years, pay off the mortgage and make a profit on the equity growth in the home.
Overpayment – This may seem like a crazy idea, who after all would want to pay too much money but this is a feature of some flexible mortgage deals. If you can pay off your mortgage early, you can literally save yourself thousands of pounds in interest. The amounts saved can be quite staggering and we would be more than happy to explain this method of repayment to you.
Payment Holidays – Some types of mortgage deals will even allow you to take a payment holiday for up to a year. This could be useful if you need to take some time of work, take a holiday or need money for other purposes. The lender will consider the state of your current payments and it helps if you have made overpayments in the past.