Mortgage guide
At any one time there may be well over 1,000 different mortgage options, only some of which will meet your needs.
There are several issues to be considered when choosing a mortgage such as-
- The interest rate charged now - and in the future
- Charges for early repayment of the mortgage
- The Mortgage Indemnity Guarantee Premium
- Whether to repay capital and interest or interest only
- Selecting the right insurance policy
It is important to assess whether the repayment will be affordable in the future should the rate rise well above the current low rates that have been maintained for some time. However, it is not that long ago that interest rates were over 15% - far higher than the rates currently available and rates are likely to increase over the medium to longer term.
As an independent financial adviser, we are in the best position to ensure that you select the mortgage that best suits you. We have specialist technology in place that enables us to search the entire mortgage market in a matter of seconds and rank the results in terms of cost, affordability, maximum loans available and various other criteria. To help you understand the mortgage market, here is a description of each type of mortgage scheme.
There are two elements to a mortgage :-
- How the interest is charged
- How the mortgage is protected and repaid
Fixed Rates
Fixed rate means you will know exactly how much you will pay each month, for a fixed period of time which can be from 6 months to 25 years.
Tracker Rates
Tracker rate mortgage schemes follow movement in the Bank of England Base Rate, at an agreed differential, so your payments can go up or down during the tracker rate period.
Discounted Rates
Discounted rate mortgage schemes follow movement in the Lender’s own standard variable rate, at an agreed differential, so your payments can go up or down during the discounted rate period
Offset Mortgages
The Offset Mortgage is a very sophisticated innovation in the mortgage market place. Once referred to as a Cheque Book Mortgage, today’s modern off-set mortgage combines not only your mortgage account, but also a savings account and a current account all into one. This set-up enables the borrower to have their monthly mortgage interest reduced, or the monthly payment by offsetting their savings and current account balances against the mortgage.
Capped Rates
The capped rate provides a fixed ceiling on the interest you pay, thus guaranteeing the interest charged on your borrowings over a predetermined preferential part of your mortgage term (usually 2 to 5 years), but in the event mortgage rates fall during the preferential period, so will the interest you pay, in line with the variable rate.
Cashback Mortgages
A cash back mortgage provides a cash rebate on completion of the mortgage, but is normally subject to higher repayments.
Repayment Mortgages
Repayment Mortgage types are designed to repay both the capital borrowed and the interest charged on the mortgage over the selected length of the mortgage, typically a 25 year period. Monthly nstalments will contain both a portion of capital repayment, and a portion of the interest charged.
Interest Only Mortgages
An Interest Only Mortgage the original amount borrowed will remain the same throughout the mortgage term. This is because the monthly payments will cover interest charges only, and so at the end of the mortgage term, the capital sum borrowed will remain outstanding. Interest only mortgages will usually have an investment product, such as an Endowment policy, Pension Plan, ISA or some other type of long-term saving plan that is designed to repay the capital element of the mortgage repayment at the end of the term.
And Finally
Whatever mortgage you decide on , remember that this is probably the largest purchase decision that you will make in your life, so contact us as your Independent Financial Advisers to guide you through the maze.
Your home may be repossessed if you do not keep up repayments on your mortgage.
