Mortgages

A mortgage is a loan taken out to buy property or land. Most run for 25 years but the term can be shorter or longer. The loan is 'secured' against the value of your home until it's paid off. If you can't keep up your repayments the lender can repossess (take back) your home and sell it so they get their money back.


The amount you borrow with your mortgage is known as the capital. Each month, part of your monthly payment will go toward paying off that principal, or mortgage balance, and part will go toward interest on the loan. Interest is what the lender charges you for lending you money.


Not only do you need to consider which mortgage is most suitable for your current needs and circumstances, you also need to think about which interest rate options are most likely to suit your needs. This section has information on the various types of mortgage product which are available.

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Information

Remortgages

Remortgaging means switching your mortgage to another deal with another lender without moving property. Some people switch mortgages because it will work out cheaper for them. For example, the introductory discounted interest rate may have finished with your current lender, and you might get a cheaper deal with another lender. Other people remortgage to consolidate their debts. 

  

It is worth noting that a remortgage isn’t always the most suitable option. Sometimes any saving made by securing a cheaper interest rate can be outweighed by the fees incurred in setting up the new mortgage and converting unsecured debt to secured debt may not be in your long term interest.


Think carefully before securing other debts against your home.


 Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Self Build Mortgages

The main difference between a self build mortgage and a house purchase mortgage is that with a self build mortgage money is released in stages as the build progresses rather than as a single amount. 


With a self build mortgage, money is released in stages as the build progresses. Some lenders will lend you money to purchase land - typically 75% of the purchase price or value (whichever is lowest).


After this, the money for the build is released in stages. These stages can be fixed or flexible, depending on the lender, but usually there are six.


There are two methods by which the money can be released during the build – at the end of each stage (known as arrears stage payments) or at the start of each stage (advance stage payments).

Buy to Let Mortgages

These types of mortgages are designed for property investors and private landlords, who do not intend to live in the purchased property but will let property to tenants.


Buying additional property for the purpose of letting it to earn rental income can be risky and complicated since there is no guarantee that house prices will rise nor that rental income will be uninterrupted.


That said, letting a second property to tenants could return respectable financial rewards over the longer term, but it's important to properly consider the risks, as well as rewards, involved in 'Buy to Let' first.


Commercial buy to lets are not regulated by the Financial Conduct Authority (FCA).


The Financial Conduct Authority (FCA) does not regulate buy to let mortgages.

Offset Mortgages

With an Offset Mortgage you can potentially reduce the amount of interest you pay by offsetting a credit balance against the mortgage debt.  Some lenders facilitate this through a single account (usually known as a current account mortgage), others offer multiple accounts that allow customers to virtually separate their finances, but whichever the mechanism, the offsetting principle is the same.


Your home may be repossessed if you do not keep up repayments on your mortgage.

First Time Buyers

People buying their first home often have specific needs when it comes to finding a mortgage. A range of mortgages exists specifically for this market sector.


Buying a home for the first time can be a daunting prospect. There’s so many things to think about – and that’s before you’ve even considered the many mortgage products, rates and lenders to choose from.

Our Top Tips

Flexible Mortgages

A flexible mortgage is a product that can make the traditional British mortgage with its fixed and inflexible payment schedule over a fixed term, such as 25 years.


  • Flexible mortgages recalculate the outstanding capital and interest (the amount you owe) on a daily basis. 
  • This allows you to make overpayments when you have money to spare, and see an immediate reduction in your loan.
  • Some also allow you to make underpayments when finances are tight, which will increase the interest you have to pay in the long term.
  • They may even allow you to take repayment holidays – a complete break from making payments as long as a reserve amount of money is in your account.
  • Any unpaid interest will be added to the outstanding mortgage; any overpayment will reduce it. Some flexible mortgages have the facility to draw down additional funds, to a pre-agreed limit.

First Time Buyers

To help you reduce the stress, here are our Top Tips for First Time Buyers.


  • Budget accurately: Be realistic about how much you can afford to spend on a house, and ensure the intended mortgage is affordable. Don’t forget to allow for furnishings, and remember older properties may require extensive work, such as re-flooring, tiling or renewing the wiring. Make sure you budget for these likely expenses in addition to the purchase price, along with other fees such as conveyancing and stamp duty.


  • Ask for a second opinion: When buying for the first time, there may be a number of details to look out for that you may not be aware of. Always take an experienced home buyer with you when viewing a property. If this is difficult to arrange, make sure you at least get some assistance at the second viewing stage.


  • Remember the bills: If you have been used to living at home with your parents, remember to budget for expenses such as council tax, gas and electricity bills, boiler servicing, and other home repairs.


  • Consider Council Tax: Make sure you know what the likely council tax charge will be in your new property. The selling agent should be able to help you.


  • Look at the local area: Even if you do not have children, remember that property in the catchment area of good local schools will always be much easier to sell on (though it may be reflected in a higher purchase price). Also, write down a list of local amenities which are important to you (shops, gym, cinema etc). Before making any final decision about where to move to, take a stroll or bike ride around the local area.


  • Speak to your motor insurer: If you have a car, your insurance premium may increase if you move to an area with a higher crime rate, or are trading off-street parking for on-street parking.


  • Check transport links: Consider the availability of public transport services, like local bus routes or the frequency of train services from your nearest station. Even if you drive everywhere, this information will be useful for anyone coming to visit you who doesn’t.


  • Check connectivity: If you are a heavy internet user, check the broadband speeds available in the area you’re moving to. The selling agent should be able to provide this information.


  • Think about commuting time: Commuting can be one of the biggest household expenses. Since you’re likely to be spending much more time on domestic chores and/or DIY, minimising your commuting distance could be important. If property is more expensive nearer to your place of work, make sure you weigh up this additional expense when compared to the costs and time of commuting.

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