Mortgages

New mortgages

There are hundreds of different mortgage deals available, all suited to different circumstances, and it can be difficult to know which one to choose. There is also a huge difference between those lenders that are efficient to deal with and who make the whole process easy and those that are quite the opposite.

That’s where we can help. We are independent mortgage advisers and we can help to find the right mortgage for you. Click here to arrange to speak to one of our mortgage advisers or telephone Richard Ludlow on (01780) 764145 or Tim Barker or Lisa Shepherd on (01205) 351114.

Remortgages

Lenders often attract new customers by offering a special deal and then rely on people staying with them at the end of the special rate period paying their full rate. You can end up paying considerably more than you need to and you should review your mortgage regularly to see whether it is worth transferring your mortgage or remortgaging to a better deal.

Again, that’s where we can help. We can compare your current deal to the best new deals available. We will need to know what rate you are paying on your existing mortgage and whether there are any penalties for switching your mortgage early. If there are, it is usually (but not always) more cost effective to stay with your existing lender until the penalty period has expired. Click here to arrange a free review of your existing mortgage.

What do you need to consider?

Whether to go for a repayment or interest only mortgage.

What type of mortgage deal to go for.

What other features (if any) that you would like?

Repayment or Interest Only?

Repayment Mortgage

A repayment mortgage is where your monthly payments cover interest on the amount borrowed and repayment of some of the capital. Over the period of the mortgage, the amount borrowed is repaid in full. A repayment mortgage is the simplest type of mortgage available and there is no risk involved. Repayment of the mortgage is not dependent upon the performance of an investment such as an endowment, ISA or pension fund.

Interest Only

An interest only mortgage is where your monthly payments cover the interest on the mortgage only. It does not include any repayment of capital. At the end of the mortgage term, the amount borrowed is still owing in full. To ensure you can repay the amount borrowed, you invest additional funds in investments which are designed to generate enough (preferably more than enough) capital to repay the loan at the end of the term.

You can choose from a variety of investment vehicles, some of which can have tax advantages. These may include an ISA, pension or other investment. However, there is an element of risk as there is no guarantee that your chosen investment vehicle will grow sufficiently to repay your loan (although you can usually top up your contributions if this looks likely to be the case).

What type of mortgage deal?

Standard Variable Rate (SVR)

All lenders have a standard variable rate. This is their standard rate and is usually applied when a discounted, fixed or promotional rate comes to an end. The rate is set by the lender and usually goes up or down whenever there is a change on the Bank of England’s base rate. SVR’s tend to be much higher than any special deals that they currently have. The only real advantage of an SVR is that they usually don’t have an early redemption penalty if you want to repay the mortgage or move the mortgage elsewhere.

Discount rate

A discount mortgage is where you receive a discount off the lenders standard variable rate (SVR) for a specified period. For example, the mortgage deal may be 1% below the lenders SVR for 2 years. At the end of the discount period the mortgage usually reverts to the lender’s standard variable rate. Some deals have penalties for early redemption.

Fixed rate

A fixed rate is where the rate of interest you pay is fixed for a specified period, eg 2 years. The mortgage then usually reverts to the lenders standard variable rate (SVR). This has the attraction that you will know exactly what you will have to pay for the duration of the fixed period. There are usually penalties for early redemption.

Capped rate

A capped rate mortgage is one that will not rise above a certain rate for the duration of the capped period. Again, the mortgage usually reverts to the lenders standard variable rate at the end of the capped period. There are usually penalties for early redemption.

Tracker rate

A tracker rate is one that moves in line with any changes to the Bank of England’s base rate, eg 1% above the Bank of England’s base rate. The rate is therefore linked to what the Bank of England decides rather than on what the lender decides.

Other features

Flexible mortgages

A flexible mortgage allows you to vary your monthly repayments. You may be able to make over or underpayments each month, make a lump sum repayment or take a payment holiday.

Cashback mortgages

A cashback mortgage pays a lump sum to you when the mortgage is taken out. The interest rate is usually higher to take into account the lump sum they have paid. There are also penalties for early redemption.

Current Account mortgages

Current Account mortgages combine a mortgage and a current account. The real attraction is that you only pay interest on the net amount owed to the lender and the interest is calculated daily, eg if you borrow £60,000 and have £10,000 in credit in your current account, you only pay interest on £50,000.

Offset mortgages

An offset mortgage allows you to offset the balance of your mortgage against any funds in a savings or current account with the same lender and pay interest on the net balance between the accounts. It is very similar to a Current Account mortgage. The main difference is that you decide whether the mortgage is offset each month compared to a Current Account mortgage where it is done automatically.

Regulated by the Solicitors Regulation Authority. Authorised and regulated by the Financial Services Authority.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT