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Variable
Mortgage
With this facility you
pay at whatever the standard variable rate of your lender is at the time.
If the standard rate increases, then your monthly interest payments will
increase, likewise, if they decrease, so will your payments. There is normally
no penalty attached to early redemption of this facility.
| Pros |
Cons |
| If interest
rates fall over the term of the mortgage, then the monthly payments
will fall. |
If interest
rates rise over the term of the mortgage, then the monthly payments
will increase. |
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Discounted
Variable Mortgage
Lenders may from time
to time offer a discount off their normal lending rate. The discount can
sometimes be quite large and can last for anything up to say 3 to 4 years.
At the end of the discount the mortgage returns to the lender’s variable
rate. As only the discount is guaranteed, if the standard rate increases,
so would your payments.
| Pros |
Cons |
| You
get a discount from the normal rate and if interest rates fall over
the term of the mortgage, then the monthly payments will fall.
This is an incentive
to secure you as a client.
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You
get a discount from the normal rate and if interest rates rise over
the term of the mortgage, then the monthly payments will increase.
Often redemption
penalties apply.
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Capped
Rate Mortgage
With a Capped Rate,
a level is set above which your rate cannot rise. You will pay the standard
variable rate of your particular lender, however if your lender’s
rate increases, yours will not increase above the level at which you have
capped. Conversely, if their standard variable rate decreases, your payments
will decrease. This facility can give you the best of both worlds however
decent rates are few and far between.
| Pros |
Cons |
| The
security of knowing that if interest rates were to increase substantially,
your mortgage payment could not increase above a set level. |
Sometimes
the capped variable rate is not quite as competitive as the standard
variable rate. Occasionally a fixed rate mortgage could be lower than
a capped rate. There are normally penalties to pay for early redemption. |
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Fixed
Rate Mortgage
The mortgage rate
is fixed at a certain rate for a certain period. Payments can neither
increase or decrease. At the end of the fixed rate period, you will revert
to the lender’s variable rate.
| Pros |
Cons |
| You
know where you stand during the fixed rate period and can budget accordingly
as your monthly mortgage payments are fixed. |
If
interest rates go down during the term of the fixed rate period, you
may find yourself paying more than if you had had a standard variable
mortgage. There are normally penalties to pay for early redemption. |
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Cashback
Mortgage
The cashback mortgage
is very popular with 1st time buyers and allows you to budget for the
expenses of moving in much more comfortably. Cashbacks of upto 8% are
often available and as long as you are aware of the down sides to these
products all is fine.
| Pros |
Cons |
| The
cashback can be used for furniture, carpets or in some cases as the
actual deposit for your new home. |
The
rates are normally more expensive with a cashback and with penalties
if you move lenders. |
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Base
rate tracker Mortgage
A fairly new addition
the mortgage rate stable the tracker has been designed due to the less
than honest actions by certain lenders to keep control of their clients
money (in their favour). In stating this I mean that when rates go down
the lenders have in the past decided to keep some of the benefit for themselves,
on reflection when rates have gone up they have decided to add to clients
worries by increasing by more than the Bank Of England increase. Trackers
are an honest little devil they promise to track the bank base rate and
should it rise they will only increase by the same amount, the same with
rate decreases you will get the full benefit of the lesser market.
| Pros |
Cons |
| A new
more honest variable rated mortgage product (at last), often no redemption
penalties apply. |
The
rates are normally not the most competitive compared with say discounted
rates, often with redemption penalties. |
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Foreign Currency Mortgage
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<<Repayment Vehicles <<Mortgages
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Repayment
Vehicles
There are a number
of ways that the capital amount or debt of a mortgage can be paid off
at the end of the term of the mortgage, I give below some examples note
that the National Lottery is not included its an obvious one I thought.
Click a link below to transfer sections.
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| Interest-Only |
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Many of the above
mortgage facilities can be run on an 'interest-only' basis (with the noteworthy
exception of a repayment mortgage. If this is the case, then the loan
amount does not reduce throughout the term of the mortgage, with the borrower
paying monthly interest payments to the lender. You will obviously have
to pay the outstanding capital sum at the end of the term of the loan
or when you redeem it. This could be done with the funds from the sale
of the property, from other investments or if you were to inherit some
money. This type of repayment is rarely suitable for clients needs and
is subject to closer scrutiny by the lenders.
| Pros |
Cons |
| This
is the cheapest way in which to borrow money for purchasing/remortgaging
a property. Of particular interest to offshore purchasers. Not suitable
for 90% of clients |
The
loan will remain at the initial level with the full amount repayable
to the lender on redemption of the facility. |
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Endowment |
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Having been criticized
by the media and in some cases rightly so. This method provides a structure
where you will be covered in the event of your death within the mortgage
term, with the opportunity to build up a fund of money to help in repaying
the outstanding loan at the end of the term or earlier with exceptional
returns. With correct Independent Financial Advice on which type of endowment
is most suitable, which way to set it up and indeed which market to invest
in this method still has good merit for young healthy, wealthy individuals
willing to accept that they are for long term growth and not short term
gain.
| Pros |
Cons |
| Enables
life cover and savings to be provided at a relatively low cost. Flexible
investment choice. |
The
fund value is dependant on investment performance and charges - serious
individual advice must be taken. |
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Pension |
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The mortgage is linked
to a pension contract which could provide life cover, a lump sum to repay
the mortgage and an income for life from the maturity date of the policy.
This is not suitable for all needs and a full analysis should be undertaken
to ensure that this is the right method for you. These loans are popular
with self employed people who have not yet commenced there retirement
planning. Term Life Assurance is not always possible
or cost effective to be arranged with the same provider as your pension
in such a case another provider would be used to cover the risk of earlier
death.
| Pros |
Cons |
| Tax
relief is available on the pension premium at one’s highest rate
of tax, with the fund itself invested in a tax efficient environment. |
Quite
expensive with returns dependent on long term investment performance
and charges - serious individual advice must be considered with this
method. |
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Individual
Savings Account (ISA)
This is not always
a packaged mortgage repayment product but we highly recommend that this
is looked at as it offers good value for money and one company to rely
on instead of two, with investment and life cover wrapped into one plan.
Non packaged are designed primarily for investors who want flexibility
and pure investment opportunity. Payments would be made into an ISA to
provide a fund to repay your mortgage debt. A separate term
life assurance would then be needed to cover your life.
| Pros |
Cons |
| Tax
efficient growth within the funds. A very competitive product resulting
in low charges and wide investment choice. The Packaged method offers
quite good value against taking separate ISA & Life plan. |
The
Non Packaged type are not a designed mortgage product and suitable
only for the more sophisticated investor - serious individual advice
must be taken. |
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| Capital
& Interest or Repayment
This method of repayment
is the original method. It offers a basis similar to a car loan, but obviously
with larger sum's of money and longer terms involved. It is suitable for
anyone who has no faith in the long term performance of the stock market.
| Pros |
Cons |
| The
loan is guaranteed to be repaid at the end of the term. |
It
offers no additional investment performance and has no built in life
cover. |
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<<Repayment Vehicles <<Mortgages
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Insurances
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Buildings
Insurance
It is a requirement
of the lender that Buildings Insurance is in place on any property over
which they have a charge. Many lenders offer their own buildings insurance,
however it may be more competitive to seek comparative quotes elsewhere.
With a leasehold property it is normally the Freeholders responsibility
to arrange the buildings insurance and to charge each leaseholder a proportion
of that fee. If the property is freehold, then the owner is responsible.
The building should be insured from exchange of contracts and the purpose
of the insurance cover is to pay for the property to be rebuilt in the
event of damage/destruction. The premium is based on the reinstatement
value of the property. For new borrowers we automatically cover you
for 6 months FREE, you do not have to have
taken your mortgage through us for this to be available.
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Contents
Insurance
Covers the contents
of the home, i.e. furniture, valuables etc., against loss, damage, theft.
There are different levels of cover, some of which will include property
outside the home. For new borrowers we automatically cover you for
6 months FREE, you do not have to have taken
your mortgage through us for this to be available.
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Term
Life Assurance
Lenders advise that
Term Life Assurance is taken out to cover the loan/mortgage. This is similar
to buying car insurance if you don't claim the policy has no value, in
this case a claim would be your sudden earlier death, not recommended
but possible. These policies are relatively inexpensive and can have additional
covers such as critical illness & waiver of premium included. These
basically cover should you contract one of a list of critical illnesses
in the case of critical illness, such occasion could be cancer, of which
the survival rate is increasing daily this would mean your plan would
pay out prior to your death in this case. Waiver of premium is a tiny
tag on plan that covers your life insurance premiums should you be off
work due to sickness or illness for a period of time, normally 6 months.
Term Life Assurance policies have no investment content and therefore
no surrender value.
If you
have any questions with regard to the above or would like to discuss your
requirements, do not hesitate to contact us. For details of how to do
this see our contact
page.
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<<Insurances <<Mortgages
<<Repayment Vehicles
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