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Which Mortgage Is Right For You?
To enquire about what mortgage deals are currently available for you, please complete our Mortgage Enquiry Form and you will be contacted back as soon we can.
To work out how much you can budget each month for a new mortgage, please see our Mortgage Budget Calculator.
MORTGAGE CHOICES
Navigating your way through the mortgage market may seen an overwhelming
and intimidating process, especially given the abundance of mortgages
and mortgage providers available.
Finding the right mortgage means finding a mortgage tailored to meet your needs, taking into consideration your lifestyle, age and financial circumstances.
Nevertheless, even after taking these factors into account, you will almost certainly be faced with an enormous variety of mortgages and differing interest rates. We can help you make an informed decision.
There are three major types of mortgage available on today's market:
- Repayment
- Interest Only
- Flexible
REPAYMENT
A repayment mortgage is structured so that the monthly mortgage payments,
comprising partly of capital and partly of interest, pay off the original
amount borrowed as well as the interest that would be accrued over a predetermined
period of time.
- A Repayment Mortgage is clear-cut and uncomplicated.
- It is a sure-fire way of repaying the loan providing that all payments are made and kept up to date.
- Total amount owed decreased as time goes on.
- Although life cover is not always required, It is advisable to have protection in place to ensure that the loan can be repaid in the event of death, thereby avoiding the need of having to sell the house to cover the mortgage debt if the worst happens.
INTEREST ONLY
So called because you only pay interest to the lender each month. The
original loan amount remains the same for the term of the loan. Therefore,
suitable investments are required in order to repay the loan at the end
of the term. These investments are arranged at the beginning of the mortgage
and they include Pension Mortgages, Endowment Mortgages, ISA Mortgages,
and other repayment vehicles. Whole of market advice available on request.
- Investments are not guaranteed to appreciate so there is a certain amount of risk involved with the Interest Only Mortgage.
- If the investment does not provide as good a return as was expected, it may not cover the loan. The bonus is then on you to ensure that any shortfall is made up at the end of the term.
- Investments associated with Interest Only mortgages are portable meaning that you can keep the investment, add to them and link them a new mortgage if you move house. (restrictions may apply from contract to contract).
- As a result of the original amount borrowed remaining constant over the mortgage term, if you sell your house the original amount borrowed will need to be repaid which could cause problems if the value of the property has fallen.
FLEXIBLE
This is a relatively new type of mortgage, which, as the name suggests
is flexible. It is structured so that you can overpay, underpay and even
take payment holidays without incurring any penalties. Most flexible mortgages
have their interest calculated daily, bringing about the full benefits
of overpaying. Regularly overpaying the Flexible Mortgage without later
underpaying it could lead to the mortgage being paid off sooner and save
you thousands of pounds in interest.
Although Flexible Mortgages will fall in either a Repayment or Interest Only basis, We have included this a separate category to demonstrate their benefits, e.g. overpaying, underpaying, payment holidays and draw down facilities etc.
- Permits overpayments and underpayments on mortgages and allows overpayments to be drawn back.
- Gives you the option to repay your loan before the end of the term by overpaying.
- Some enable you to use your mortgage account as a current account, giving you the ability to pool your money with the standard current account options of a cheque book and debit card.
- There are generally no penalties for redeeming your mortgage.
- Provides an excellent saved on your loan will normally outweigh the amount you would receive from a savings account, especially for higher rate tax payers.
THE DIFFERENT INTEREST RATE TYPES
VARIABLE
Usually known as the standard variable rate. This rate normally fluctuates
in line with the Bank Of England interest rate.
DISCOUNTED
This is the variable rate but set at a fixed percentage below the lenders
standard variable rate. If you wish to pay back your loan before the end
of the discounted rate, you may have to pay a charge known as a redemption
penalty. In some cases the charge applies for a short time after the discount
rate has ended.
FIXED
The rate is static for a set period of time, usually a number of years.
Once this period is finished, the rate goes back to the lenders variable
rate. You may pay a redemption fee if you wish to repay the loan before
the end of the fixed rate and sometimes for a short period after.
CAPPED
These rates limit your payment to variations between a minimum and maximum
rate for a set period of time.
CASHBACK INCENTIVE
As another "Special offer", companies offer cashback as another incentive
to use their products. With cashback the lender will give you a sum of
money on completion of the mortgage. You may have to repay the cashback
if you repay the loan before a certain period.
VALUATION
Lenders require a standard valuation to be undertaken on a property before
even considering a mortgage offer. This is to ascertain the true value
of the property being purchased or remortgaged. There are three main types
of valuation.
- Standard valuation report - this is the most basic and is really for the lender to determine the value, it will pick up on any major problems but will not go into depth about any problems found.
- Homebuyers report - This will provide the borrower with information about the general condition of the property in far more detail than a standard valuation.
- Full structural survey - If the property being purchased is more than 10 years old or there are any aspects of the condition of the property that you would like investigated, a full structural survey will give you the required information prior to making a commitment.
Due to the fact that property prices may vary according to market conditions, the value of your property may depreciate as well as appreciate. In future, this could mean that your mortgage exceeds the properties current market value. This is known as "negative equity".
COMMISSIONS PAID TO INTERMEDIARIES
It is common for intermediaries to be paid a procurement fee or commission by lenders and brokers for introducing business and doing work which would otherwise have been done by their own staff.
If the advisor receives more than £250, then they are obliged to tell you under the Mortgage Code to disclose to you the exact amount they have received.
Your home is at risk if you do not keep up payments on a mortgage or other loan secured on it.
To enquire about what mortgage deals are currently available for you, please complete our Mortgage Enquiry Form and you will be contacted back as soon we can.
To work out how much you can budget each month for a new mortgage, please see our Mortgage Budget Calculator.
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