|
•
Flexible mortgages
• Interest
Rate options
• •
Variable rates
•
• Fixed
rates
• • Capped
rates
• •
Discounted
interest rate
• •
Offset
mortgage & current account mortgages
• Additional
costs involved
•) Whilst
many different mortgage options are available, there are two main
•) methods
for repaying a mortgage: interest only or repayment
(capital
•)
and interest).
•)
With an interest only mortgage,
you pay monthly interest payments
•)
only to the lender and arrange a further investment, which will
establish a
•)
fund to pay off the loan at the end
of the term.
•) Alternatively,
flexible mortgages
are becoming more popular; lump
•)
sum payments can be made as and when
funds become available
•)
throughout the mortgage term.
•) Mortgage
lenders are reasonably flexible regarding the investment •)
•) vehicle that is used
for repayment; popular choices are ISAs, unit trusts,
•)
pensions and until recent years, endowment policies.
•) With
a repayment mortgage, monthly payments cover
both the
•)
interest and a small part of the
capital. This mortgage option offers the
•)
security that the loan will be paid
off at the end of the term.
 |
 |
•) These
will suit you if your financial circumstances vary or you want
to use
•)
bonuses or commissions, often at
irregular intervals, to repay
•)
your mortgage.
•) There
should be no redemption penalties for lump payments and interest
•)
will be calculated
daily.
•) A
large proportion of the loans we arrange are on a flexible basis.
We can discuss which would be most beneficial
for your circumstances.
Variable Rates
•)
This
could be the lender’s own calculated Standard Variable
Rate
•)
(SVR), which
fluctuates as lending rates change.
•) Or
a Bank of England Base Rate Tracker rate that
is normally set at
•)
a fixed margin above the Bank’s base rate for the life of
the loan. Both
•)
types normally share
an initial discount.
•) Lenders
normally calculate their SVR in relation to movements in the
•)
Bank of England
Base rate, for example keeping between 1 or 2 percent
•)
above. The SVR might
go up and down as soon as the base rate changes
•)
or less frequently, e.g. once
a year, reflecting interest rate changes
•)
during that period.
•) Loans
arranged at the lenders standard variable rate usually have no
•)
completion or booking
fees and no penalties if you pay off or move the
•)
mortgage before the end of
the term.
Fixed rates
•) Here
the interest rate is fixed for a set initial period, typically
between
•)
two and ten
years.
•) Unlike
variable rates, fixed rates allow you to budget your monthly home
•)
expenses as
you know that your monthly repayment will remain
•)
unchanged for a set period.
•) You
are also protected, during this set period, from any increases
in
•)
interest rates, although equally you will not benefit from falling
rates.
•) Lenders
often charge a booking fee on fixed rate loans.
•) Redemption
penalties are generally incurred if all or part of the loan is
•)
paid off within
the fixed period.
•) Many
lenders offer loans with a very low initial fixed rate, on which
•)
extended redemption
penalties apply for one or more years beyond the
•)
fixed period, normally
when the loan has reverted to a much higher
•)
variable interest rate. We
do not endorse these arrangements and advise
•)
against them.
Capped rates
•) The
loan has a maximum interest rate, or cap, for a specific time
period.
•) This
protects you from an unexpected rise in interest rates.
•) If
the lender's standard variable rate falls below the cap, you will
benefit
•)
because your
rate will also decrease.
•) If
interest rates rise, you will not be charged above the capped
rate.
Discounted interest rates
•) The
lender offers a discount, below their variable rate for a set
period
•)
of time.
•) This
means your payment can still be variable, but at a lower interest
•)
rate for a given
period.
•) Once
the discount period has expired, your mortgage will revert to
the
•)
normal variable
interest rate.
•) Redemption
penalties can apply.
Offset mortgage & current
account mortgages
•) Savings
are used to offset mortgage debt and therefore you only pay
•)
interest on the difference between your outstanding mortgage balance
•)
and your savings.
•) Theoretically
you therefore earn tax-free interest at your mortgage
•)
interest rate.
•) With
a current account mortgage your current account balance is also
•)
offset against the mortgage debt. Your mortgage debt can also
•)
be treated as
a large overdraft facility.
 |
|
•) Stamp
duty
•) Nil below a property value
of £125,000
•) 1% between £125,000
and £250,000
•) 3% between £250,000
and £500,000
•) 4% over £500,000
•)
Survey fee unless you are quite happy that
your chosen property is
•)
sound, you would be well advised to instruct a homebuyers report
or full
•)
structural survey.
•) Solicitor’s
costs
•) Their
fees
•) Local
searches
•) Necessary
reports for the lender
•) Land
Registry fees
•)
Mortgage Lenders costs.
A lender may charge none, one or
some
•)
of these fees:
•) Valuation
fee
•) Administration
fee
•) Booking
/ Completion/Arrangement fee (can usually be added to loan)
•) Mortgage
Indemnity Guarantee*
•) Redemption
penalties
| |
|
*Mortgage
Indemnity Guarantee (MIG) also comes under a variety of other names
depending on the lender: Higher Loan Insurance, Mortgage Indemnity
Charge and High Percentage Lending Fee. Whatever the name, MIG is
essentially a type of insurance against losses that lender could
incur if the property had to be repossessed and sold in the event
of the borrower defaulting on the loan. It protects the lender in
the instance that the sale of the property is not enough to repay
the amount that they are owed. The lender will have a loan to value
threshold, above which a MIG fee will be required; the thresholds
vary from lender to lender, but will generally be between 70% and
90% with many lenders now not charging MIG at all.
|
