So you’ve searched high and low for the right property and you’ve now found your dream home but where do you start on the right mortgage product?
Here at Premier One it’s our job to help advise you on exactly that.
TYPES OF MORTGAGES
This seems to be the most popular repayment method. Each month you’ll pay both capital and interest on your borrowing so at the end of the mortgage term you will have paid off the borrowing in full and own your home outright.
A few years back this type of repayment was more popular. As mortgage lenders have restricted the criteria to borrow on an interest only repayment it’s become less favourable. With Interest only you are only replaying the interest and no capital meaning what you borrow at the beginning of the mortgage term you would still owe at the end.
Most lenders will insist of a repayment vehicle running along side the mortgage such as an endowment or pension to repay the mortgage at the end of the term. However lenders will advise you that you will have to accept the risk that a repayment vehicle may not perform and you may end up with a shortfall leaving you unable to repay the mortgage when the term finishes.
This type of mortgage is fixed for a period of time usually two, three, five, seven or ten years. The monthly repayment will stay the same and not later for the fixed term. The benefits of a fixed rate are certainty, you can budget knowing that your monthly repayment will not go up or down during that fixed rate period.
When the fixed rate period ends you will automatically go onto the lenders variable rate (SVR) however just before this you should be contacted to advise that you can either switch to a new product or remortgage to another lender. Most lenders will offer portability in their products meaning that if you decide to move you will be able to port your existing rate onto a new property. If however you decide to pay the mortgage in full an early repayment charge will be added.
This rate can go up and down depending on certain economic factors or at the lenders discretion. It will typically move up and down in line with the Bank of England base rate. Variable rates have in previous years have been lower than fixed rates but since the Bank of England rate has been consistently low the difference between the variable and fixed rates is not as prevalent as it’s been in years past.