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Whether you’re a first time buyer, are moving home and need a new mortgage or you're staying in your property and remortgaging, this mortgage guide is designed to help you.
With a repayment mortgage, you pay part interest and part capital repayment to the lender each month and in this way the capital debt outstanding is reduced until the loan is repaid at the end of the term, providing all your repayments are made in full and on time.
With an interest-only mortgage, you make no capital repayments to the lender until the end of the term. Instead payments may be made into an investment designed to repay the loan at the end of the mortgage term. With this type of mortgage there is a risk that the value of the investment may not be enough to repay the debt. During the mortgage term, you pay only interest to the lender on the outstanding balance.
Please note that Embrace Financial Services Ltd does not provide investment advice, and should you require such advice, we recommend that you contact an independent financial adviser. Neither Embrace Financial Services Ltd nor PRIMIS Mortgage Network are responsible for any advice you receive from a third party.
Some lenders are able to offer a combination of repayment and interest-only, which may be more suited to your individual circumstances.
If you are buying your property to rent out, then you will need a buy to let mortgage.
Once you have decided whether you want a repayment or interest only mortgage, you need to decide the type of interest rate that is right for you. The possible types of interest rates are: standard variable, tracker, fixed, discount, flexible, offset and cashback.
With this type of mortgage your payments will go up or down when the lender's mortgage rate changes. Most standard variable rates tend to move in line with the Bank of England base rate, but there is sometimes a delay and there is no guarantee that the lender will pass on the full effect of the increase or decrease. When the interest rate goes up, the amount you have to pay also rises, and it falls when interest rates comes down.
This is a variable rate where the interest rate is a set amount above, below or equal to the Bank of England or some other base rate and so always "tracks" changes in that rate. If you're on an introductory tracker rate, your mortgage will usually go onto a standard variable rate or another tracker rate at the end of the initial term.
The mortgage interest rate is fixed for a specified number of years, so you know what your interest payments will be over that period. Following this period, the rate will usually revert to the lender's standard variable rate.
A discounted rate gives you a set 'discount' off the lender's standard variable rate (SVR) for a specified period. For instance, if the discount was 1%, you will be charged 1% below the SVR for the period of the discount. When your discount mortgage deal comes to an end, your lender will typically transfer you automatically onto their standard variable rate.
These give various benefits which usually include the ability to vary monthly payments in line with your changing circumstances. They may also allow you to take "payment holidays" and to borrow back any overpayment you have made. Because of their flexible nature and the variety of schemes available, it is not possible to give a full description. However, your mortgage adviser will provide more detail if you are interested in this type of loan.
This is a flexible mortgage linked to your savings or current account. With this type of mortgage, you are only charged interest on the net amount you owe the lender, after offsetting any savings or current account balances against the amount of your mortgage.
Some loans offer a lump sum which is paid out following completion, with a mortgage charged at the lender's standard variable rate. Smaller cashbacks may be offered with reduced rates and other incentives as a combination package. When the initial mortgage deal comes to an end, your mortgage will usually go onto the lender's standard variable rate.
Please note that some mortgage schemes may have arrangement fees when they are set up, and have early repayment charges if they are redeemed, either partially or fully, within a specified period of time.
All lenders have to quote an Annual Percentage Rate of Charge (APRC) in addition to their standard interest rate. This is to help you compare different schemes. The APRC is the total cost of the credit to the consumer, expressed as an annual percentage of the total amount of credit.
Most mortgages are for 25 years. However, some lenders will allow mortgages of up to 30 years or may ask you to have a shorter term, for example 20 years. The mortgage length may affect your monthly mortgage repayments.
Take a look at our repayment calculator to see how much a mortgage could cost you. This is measured depending on how much the house you are wanting to buy is, the deposit you have available, the interest rate and the repayment length.
Remortgaging could give you the flexibility to change your mortgage as your lifestyle changes. Some of the reasons why you might wish to remortgage are:
Whatever the reason, there could be advantages to be had by switching mortgages. But with so many mortgage products available, how can you be sure you’re getting the right deal?
That’s where our partners Embrace Financial Services' mortgage advisers can help: Call free on 0800 470 1182 ^ to talk to a qualified mortgage adviser for no obligation, professional remortgage advice.
A buy to let mortgage is for those who wish to purchase a property with the sole intention of letting it out to tenants. Whether you are a first time landlord or an investor looking to expand your portfolio of properties to let, our partners Embrace Financial Services can assist.
*Exclusive deals are made available to Embrace Financial Services by PRIMIS Mortgage Network, to which Embrace Financial Services are an Appointed Representative.
The Government has created the Help to Buy schemes to make getting onto, or moving up, the housing ladder more accessible for house buyers. Home owners and first time buyers may now be able to purchase a home with as little as a 5% deposit.
For further information see https://www.gov.uk/affordable-home-ownership-schemes/overview*
*Please be aware that by clicking onto the above link you are leaving the Reeds Rains website. Please note that neither Reeds Rains nor First Complete Ltd are responsible for the accuracy of the information contained within the linked site accessible from this page.
Sources: October 2016 http://helptobuywales.co.uk/, http://www.gov.scot/Topics/Built-Environment/Housing/BuyingSelling/help-to-buy, and http://www.helptobuy.org.uk/