| Mortgages
and Re Mortgages |
| Which
Mortgage is Right For You? |
Navigating your way through the
mortgage market may seem an overwhelming and
intimidating process, especially given the abundance
of available mortgages and mortgage providers. By
selecting Carl Summers Financial Services you will benefit
from qualified mortgage advisers searching the 'Whole
of Market' to find the best deal that suits your requirements.
Repayment Mortgage
A Repayment Mortgage is structured so that the monthly
mortgage payments, comprising partly of capital and interest, pay off the original amount borrowed as well as the interest that would be accrued over the
mortgage term, by the end of the term.
A Repayment Mortgage is clear-cut and uncomplicated. It is a guaranteed way of repaying the loan provided that all payments are made and kept up with. The amount that you owe decreases as time goes on. Although in most cases it is not compulsory to arrange life cover to protect the
mortgage, it is worthwhile to arrange at least life cover to ensure the loan can be repaid in the event of your death and to avoid the house having to be sold in order to repay the
mortgage. It is prudent to protect yourself and your
mortgage in the event that you become unable to work because of illness or injury. We have a wide range of protection such as income protection, critical illness plans and mortgage & unemployment cover to protect you and your
mortgage.
Interest Only Mortgage
These are so called due to the fact that you pay interest to the lender each month. The original loan amount remains
outstanding for the term of the loan. Therefore, suitable investments are planned in order to repay the loan at the end of the term. These investments are arranged at the beginning of the term and they include
Pension Plans, Endowment Plans,
PEPs, ISAs, and so on.
The amount originally borrowed on Interest Only mortgages does not change because you pay off the capital at the end of the term. This is done by contributing towards the "Repayment Vehicle" (i.e.: the
investment's) chosen, which aim to provide a sufficiently large sum to repay the loan at the end of the term.
These mortgages are deemed to be a higher risk than
repayment. This is because the repayment vehicle, i.e the investment, is not guaranteed to appreciate in value, as they are usually stock market based. If the investment does not provide as good a return as was expected, it may not cover the loan. The onus is then on you to ensure that you can repay the loan at the end of the term.
Investments associated with Interest Only mortgages are portable meaning that you can keep the investment, add to them and link them to a new
mortgage if you move house. Also, as a result of the original amount borrowed never going down, if you sell your house, the entire amount borrowed will need to be repaid.
So, now you know what types of mortgage are available to you, what about the types of interest rates? So many choices aren't there? Don't worry about getting confused with either choosing the right mortgage or interest rate type for you. Through discussions with you, we can come up with the right
mortgage that suits your needs, lifestyle and income. |
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| Interest
Rate Types |
There are a variety of interest
rate types available to you.
These are;
Fixed
Discount
Tracker
Standard Variable
Off Set
Capped
Cashback
Current Account
Flexible
It is important to note that interest rates can
fluctuate with very little warning. Therefore this is
another important area, which must be seriously
thought about due to the different types of interest
rates that are available and their implications.
Current mortgage interest rates depend on the financial markets. As these rates fluctuate, so
to can the amount you pay each month. However, mortgage lenders put together "Special offers" to entice you to buy from them. Some of these special offers include fixed, variable and discounted offers.
Each of these offers has advantages and disadvantages. For example, you may think that interest rates are going to decline so you settle on a variable rate but if the rate goes up, you will have to pay more. Whereas a fixed rate remains static for a set period of time so that you have a set rate that you pay each month, irrespective of the actual rate at that time. |
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| Mortgage
Interest Rate Information |
Fixed Rate Mortgage
This type of mortgage allows you to keep a static rate of interest for a specific period of time, i.e. as its name suggests, you will be fixing the rate of interest that you pay at a given level, keeping your monthly
mortgage payments level, irrespective of interest rate fluctuations.
The Benefit of this is BUDGET PLANNING. You will know exactly the amount being deducted from your bank account each month, even if the interest rates increase significantly. The Drawback of this is that if interest rates FALL during your fixed rate period, you will be paying more during this time, making it costly for you.
On average, fixed interest rates are more expensive than other
mortgages and usually incur a booking or arrangement fee payable to the lender. This is because of the budget certainty safeguards that they offer.
When the fixed rate period is finished, you will revert to the lenders standard variable rate. If you want to repay your mortgage in full or if you want to
remortgage away from the fixed rate, you will probably incur a redemption penalty.
Discount Rate Mortgage
This type of interest option will give you a percentage reduction off your mortgage lenders standard variable rate. The discount will only apply for a specific period of time. The Benefit of this is that when interest rates drop, so do your monthly payments, ensuring that you are not paying "over the odds" for your mortgage.
The Drawback is that you will not have the budget certainty as with a fixed rate.
Your payments will change as interest rates change and
if you do not have a good level of disposable income available to you, the monthly repayments, living costs and savings may stretch your budget to the limit. You may find that what was a comfortable level of outgoings soon becomes unaffordable. Again, if you repay or
remortgage away from your lender during the
discount rate period, you may have to pay a redemption penalty.
Tracker Rate Mortgage
Tracker mortgages work on the same principle as discounted rate
mortgages. The interest rate that you pay stays within a given level of the Bank of England Base Rate. It will experience the same fluctuations as above and has the same benefits and drawbacks.
Standard Variable Rate Mortgage
It is the rate that is standard to lenders. As it's name
suggests, the rate is variable i.e, it will normally
fluctuate with the Bank of England base Rate increases
and decreases.
Capped Rate Mortgage
These rates limit your payments to variations between a minimum and maximum rate for a set period of time.
Cashback Mortgage - Cash Back Rate Mortgage
Lenders offer cashback as another incentive to use their products. With
a cashback mortgage the lender will give you a sum of money on completion of the mortgage. For this type of offer, you are usually restricted to the standard variable rate for a set period, and have to repay some or all the cashback if you wish to redeem your loan sooner.
Off Set Mortgage Account - Current Account Mortgage
Your mortgage and current account is put together into one large bank account, still giving you the ability to use your account as you normally would. The mortgage is offset against the credit balance in your current account and the monetary amount of interest that you pay is adjusted accordingly.
Flexible Mortgages
These are structured so that you can overpay, underpay and even take payment holidays without incurring any penalties. Most flexible mortgages have their interest calculated daily, bringing about the full benefits of overpaying. Regularly overpaying the Flexible
Mortgage without later underpaying could lead to the mortgage being paid off sooner.
Flexible mortgages allow you to vary the amount you pay, either overpaying it, under paying it or taking payment holidays as long as you do not exceed your original
mortgage threshold. Some enable you to use your
mortgage account as a current account, giving you the ability to pool your money with the standard current account options of a cheque book and debit card. Also, you may prefer to link a savings account to your
mortgage, offsetting interest due on your savings against interest payable on your
mortgage.
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Your home
may be repossessed if you do not keep up repayments on
your mortgage. |
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Let Carl Summers Financial
Services save you time arranging your mortgage so you can
enjoy the nice things in life
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