Mortgage Facts

A Mortgage is a large loan usually required when you want to buy a property to either live in, or, rent out to tenants. This loan is, in most cases secured against the value of the property itself until the loan has been repaid.

The Mortgage lender can repossess the property if the Mortgage repayments are not kept up, in order in reclaim the loan.

The Mortgage repayments are made up of two parts, Capital and Interest.

The lender makes its profit on the amount of interest it charges on the loan.

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Types of Repayment

Interest Only Mortgage
As the name suggests, the payments on this type of loan consists only of the Interest part of the mortgage. At the end of the term the capital part of the mortgage will remain. This will still need to be paid back. The balance can be paid through an investment vehicle or by the sale of the property.
This type of mortgage is popular with potential Landlords obtaining Buy to Let mortgages.
The monthly payments are considerably higher with the Repayment mortgage because you are paying off the full loan.
Capital and Interest or Repayment Mortgage
With this type of mortgage your monthly payments will consist of part capital and part interest, and at the end of the mortgage term the debt is fully repaid.

Types of Repayment

Interest Only Mortgage
As the name suggests, the payments on this type of loan consists only of the Interest part of the mortgage. At the end of the term the capital part of the mortgage will remain. This will still need to be paid back. The balance can be paid through an investment vehicle or by the sale of the property.
This type of mortgage is popular with potential Landlords obtaining Buy to Let mortgages.
The monthly payments are considerably higher with the Repayment mortgage because you are paying off the full loan.
Capital and Interest or Repayment Mortgage
With this type of mortgage your monthly payments will consist of part capital and part interest, and at the end of the mortgage term the debt is fully repaid.

Different Types of Mortgage

There are many types of mortgages available here is a list of the main ones.

Fixed Rate Mortgage
With this type of mortgage the interest rate is set for a fixed period, usually between 2-5 years. This gives you the peace of mind that your repayments will remain the same within the fixed period regardless of any fluctuations in the interest rate. Of course, if the interest rates were to go down then you will not benefit from the possible reduction. If you were to exit the deal within the fixed rate period there will be “exit penalties to pay” these are called Early Repayment Charges (ERC’S)
Standard Variable Rate (SVR)
This is the rate set by each individual lender at their own discretion and is loosely linked to the bank of England base rate therefore the interest rate can fluctuate at any time in line with BoE rate changes. You can switch to a better deal at any time without having to pay any exit fees.
Offset Mortgage
An Offset mortgage is where your Mortgage account is linked to your Savings account (with the same lender) and the interest you pay on your mortgage is offset by the amount you have in your savings account. This is especially beneficial for people with a large amount of savings as this will allow them pay off their mortgage earlier than if they were on a different type of mortgage.
tracker mortgage
This mortgage “tracks” the Bank of England base rate. The rate will be set by the lender at level +1-2% above the BoE rate. The borrower’s repayments will rise or fall in line with any changes in the Bank of England rate. As with Fixed mortgages these are set for a certain period and may also be subject to ERC’s.

Family Assisted Mortgages

JBSP Mortgage
A Joint Borrower Sole Proprietor mortgage allows a parent or a close family member to help their relative buy a property by being party to the Mortgage but not named on the title deeds.
Guarantor Mortgage
A close family member acts as a guarantor for the mortgage, this means that if the mortgagor cannot make the payments then the guarantor agrees to make the payments on their behalf.
Gifted Deposit Mortgage
This is not a mortgage type as such, merely a deposit declaration. A close family member gifts the deposit to their relative to buy a property. This must be a true gift “not to be repaid” and the person gifting the money must sign a declaration as proof.

Family Assisted Mortgages

JBSP Mortgage
A Joint Borrower Sole Proprietor mortgage allows a parent or a close family member to help their relative buy a property by being party to the Mortgage but not named on the title deeds.
Guarantor Mortgage
A close family member acts as a guarantor for the mortgage, this means that if the mortgagor cannot make the payments then the guarantor agrees to make the payments on their behalf.
Gifted Deposit Mortgage
This is not a mortgage type as such, merely a deposit declaration. A close family member gifts the deposit to their relative to buy a property. This must be a true gift “not to be repaid” and the person gifting the money must sign a declaration as proof.

Different Types of Mortgage

There are many types of mortgages available here is a list of the main ones.

Buy to Let Mortgages
This type of mortgage is available to Landlords who wish to buy a property with the sole purpose of renting it out for a profit. Most people use the “Interest Only” option when they take out this type of loan as it suits their business purposes, with the intention of selling the property at the end of the mortgage term.
Impaired Credit Mortgages
You can still get a mortgage even you have a bad credit history. There are lenders who will look at your credit file, assess your current situation and offer you a mortgage depending on the level of risk they are prepared to lend on. Unfortunately, the interest rates charged on these types of mortgages will be significantly higher than on a normal mortgage.
Overseas Mortgages
This type of mortgage is available to people who wish to buy a property abroad, it could be used to buy a holiday home/holiday let. Or, it could be used buy place to retire.
Commercial Mortgages
A commercial mortgage is normally used to buy a business premises to either trade / work from or rent out as a business. It can be used to buy anything from a retail premises to a large warehouse or a factory.
Bridging Loans
A Bridging loan can be used to ‘bridge the gap’ between buying a new property and selling your old one. It can also be used to buy a property at auction where you will need to purchase quickly.
Development Finance
A Development loan granted for the development or refurbishment of residential, commercial properties. This type finance is mostly granted to experienced builders and developers to enable them to initiate their build projects. It is possible for individuals without experience to get a loan, so long as they have a detailed plan and bring together an experienced build team to help them.

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