Mortgages Explained.
There are broadly two types of mortgage, the repayment mortgage and the
interest only mortgage.
Mortgage income multiples.
To obtain a mortgage most lenders will consider a loan based on a multiple of a borrower’s
earnings.
If you are single it may be 3 times earnings. If you are borrowing jointly with another person, the equation is
typically 3x one earner plus 1x the second or 2.5 the joint earnings.
It can make a difference which lender you choose if different lenders offer different multiples.
Mortgage interest options.
There are many different interest options for mortgages. These include: Fixed rate mortgage, variable rate
mortgage, capped and collared mortgages, discounted mortgage, low start
and deferred interest mortgages.
Types of UK Mortgage.
Brief explanations of the different types of UK mortgage are
given below, please follow the links for more information.
Repayment Mortgages.
A loan is made for a fixed term say 25 years and the borrower makes repayments on a monthly basis. Each monthly payment is made up of capital and interest.
more >>
Interest only Mortgages.
with an interest only mortgage, the capital remains outstanding until the end of the mortgage term and you pay only interest.
You must have some form of repaying the capital at the end
of the term. more
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Endowment Mortgages.
An interest only mortgage has to be repaid in full at the end of
the term. One method of repayment is an endowment effected for a
similar term to repay the loan.
more >>
Pension Mortgages.
Normally a borrower will use a personal pension to repay a mortgage, but if it is acceptable to a building society the tax free lump sum from an occupational scheme could be used if it is likely to be sufficient to repay the loan.
more >>
ISA Mortgages.
An ISA is another method of accumulating capital to pay back an interest only mortgage.
ISAs are tax-efficient products and generally offer better value than endowments.
more >>
Your home may be repossessed if you do not keep up repayments on your
mortgage.
The FSA do not regulate some forms of mortgage.
When arranging a mortgage you can choose how we are paid: Pay a fee,
usually 0.25% of the loan, or we can accept commission from the lender.
