Mortgages

Whether you are remortgaging, a first time buyer, looking for a commercial mortgage or a buy to let mortgage then it is essential to get advice. The mortgage market is diverse in its lenders and the products that they provide. To be able to give mortgage advice the advisor has to be both qualified and experienced this is the requirements of the financial service authority. This ensures that when requesting mortgage advice that you will be speaking to mortgage professionals who have enough knowledge about the industry. It also ensures that you get the required mortgage that will fit your requirements. The main aspects to consider when considering a mortgage are as follows.

Types of mortgage

Remortgage

A remortgage is when a you currently own a property and are looking to take out a new mortgage or are renewing your mortgage. Remortgaging is essential to make sure that you are getting the most suitable mortgage for your current requirements. It is essential to shop around and to get advice so that you get the most competitive and suitable remortgage package for your requirements. For example some remortgage packages come with a free valuation, free legal services or cashback. An advisor will be able to inform you of which deals are not only the most suitable to fit your requirements but are also the best value.

Purchase

A purchase is when a homeowner or somebody who has owned a home is looking to a purchase a new property. These deals vary depending on the lender.

First Time Buyer

First Time Buyer mortgages are for people who have never owned a property before. Different lenders offer varying first time buyer packages. For example some lenders offer products that require less deposits than their main stream products, may take into account gurantor’s and will offer varied offerings to help first time buyers get onto the property ladder.

Buy To Let Mortgage

Buy to let mortgages products are quite varied in the criteria that is required from lender to lender. Whether it is a remortgage or purchase it is well worth getting advice to help you find the right buy to let product that fits your requirements. Generally the lender will want to see that the rent will cover the mortgage payments or that the client will be able to afford to pay the buy to let mortgage as well as their residential mortgage if they have one.

Commercial Mortgage/ loan

A commercial mortgage is required when you are trying to obtain finance for your business. This maybe to secure or remortgage a business premises. Each commercial mortgage is different and the lender will take each case on its own merit. It is essential to get advise especially in the current economic climate so that the business proposition can be presented correctly.

Types of mortgage rate  – fixed rate mortgage, tracker mortgage, variable mortgage .
The three main types of mortgages are :

Fixed rate mortgage

A fixed rate mortgage is one where your interest rate is fixed for a certain amount of time. These rates give security to the borrower as they will know how much their monthly payments are for the duration of the fixed rate. So if interest rates increase or decrease then the fixed rate will not change. At the moment as interest rates are quite low fixed rates tend to be higher than tracker and variable rates as it is likely that rates may go up in the future although this is not guaranteed.

Tracker Rates

A tracker rate follows by the Bank Of England Base rate by a certain percent. For example if the  Bank Of England Base rate was 0.5% and you had a tracker of 2.0% above the Bank Of England Base Rate then you would be paying 2.5%.  If the Bank Of England Base Rate increased by 0.5% then you would be paying 3%. The Tracker rate is riskier than the fixed rate as you are vulnerable to interest rate movements as this movement could increase or decrease your mortgage payments.

Standard Variable Rate

A Standard Variable Rate mortgage is set by each individual bank, it is the banks rate. The bank does not have to change the rate of the Bank Of England Base Rate changes. It is variable as a tracker is in that it can fluctuate up or down.

Bank Of England Base Rate

The Bank Of England Base Rate is reviewed every month and is a key component in controlling the economy. This often gives us an indication of whether or not mortgage rates are going to go up or down.

Other rates

There are other rates available such as stepped and discounted to name a few. Please be aware of what rate you are considering and ensure that you ask an advisor or read your key features document to ensure that you know what implications the rate you choose will have on you.

Payment types Repayment Or Interest Only Mortgage

There are two main methods of repaying a mortgage on an interest only basis or a repayment basis.

Interest Only Mortgage

An Interest only mortgage only pays off the interest owed on the mortgage. It will not make any capital repayments into the mortgage sum. To pay off the mortgage it is advisable to have a repayment vehicle running along side the mortgage such as an Isa, saving scheme or endowment.

Repayment Mortgage

A repayment mortgage pays off both the capital and the interest so at the end of the term of the mortgage it will be paid off.

The Mortgage Term

The mortgage term is the number of years that the mortgage runs over. This should not be confused with the length of time that you have a specific mortgage rate for. For example you can have a fixed rate for 2 years over a 25 year term, this means that after the two years your fixed rate will finish however you would still have 23 years left on the mortgage. The amount of years that you take the mortgage over will depend on your age, how much you can afford to pay each month and your objectives. Reducing the term of your mortgage can reduce the amount of interest that you pay over the duration of the mortgage but it will put the cost up. Please seek advice on this matter to see which term is best for you.