Mortgages

Mortgages are the largest single transaction in most people's lives. Buying a property can be a stressful and time consuming experience, although nowadays the financing of a mortgage is a case of finding and selecting the best deal, rather than simply accepting a lender's offer.

Hundreds of banks, building societies, and smaller niche lenders compete for your business, all offering a variety of interest rate deals, associated fees and other enhancements to attract borrowers.

There are 2 main methods of repaying a mortgage loan, and it is possible to set up the loan on a 'part and part' basis:

Repayment (capital and interest) mortgages
Under a repayment mortgage your monthly repayments consist of both interest and capital. This means that over time the amount of money you actually owe will decrease. In the early years your repayments will be mainly interest and therefore the capital outstanding will reduce slowly in the early years.

Interest only mortgages
As their name suggests, with an interest only mortgage you only repay the interest on the loan. At the end of the term the capital is still outstanding. Therefore you will usually need to take out some kind of investment policy to save up enough to repay the loan at the end of the term.

YOUR HOME MAY BE REPOSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Mortgage Interest Terminology

Variable Rate (SVR)
The SVR is the lenders standard rate, usually 1 - 3% above the Bank of England Base rate. With a variable rate mortgage you can usually switch lenders at any time without being penalised.

Fixed Rate
This allows you to repay interest at a fixed rate, irrespective of any base rate fluctuations. So your monthly repayments will remain the same every month for a time period agreed between you and your lender. Fixed rate mortgages often have high redemption penalties, therefore, care is required to ensure this is suitable for you. The lender will often charge a 'booking fee' to apply for this type of mortgage.

Tracker
A tracker mortgage will track a given parameter (e.g. the Bank of England Base Rate), therefore, you will benefit from any falls in interest rates, but will also have to pay more each month should the rates increase.

Discount
This is usually offered against the lender's standard variable rate (SVR). It provides a discount from the lenders SVR for a fixed period of time. The interest rate will fluctuate, meaning your monthly repayments may differ from month to month, but the discount remains at a constant for the duration of the discount period .

We are happy to explain these in more detail. Just call 01223 846726 or email info@downingfinancial.co.uk