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Mortgages – Methods & Types
Purchasing a property is one of the most important financial decisions of your life. With so many lenders offering so many mortgages, how can you be certain of choosing the one that’s right for you? Affinity Financial Planning has the experience to lead you through this financial maze. All of our advisers are Fully Qualified and Independent. We have access to all UK lenders.
Listed here, are some of the areas we specialise in and information that you may find helpful.
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Repayment Methods |
Capital & Interest Repayment Mortgage
Repayments consist of both capital and interest with the debt reducing over the term of the mortgage. This is the most common method of paying your mortgage. It is recommended that life assurance is arranged to protect the mortgage debt.
Interest Only Mortgage
Interest only repayments are made to the lender with no capital being repaid. The amount borrowed remains outstanding throughout the entire term of the mortgage. The most common means of repaying the amount borrowed was via an endowment plan or more recently an ISA. However, due to these plans being linked to stock market investments, there is no guarantee of them reaching the amount needed to repay the loan. |
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Mortgage Types |
Fixed Interest Rate
Interest rate is fixed for a period of time, typically 1 to 10 years. This allows you to plan your finances as your interest rate will not increase during the fixed period.
Discounted Interest Rate
The Lenders Standard Variable Rate – known as the SVR - is discounted for a period of time, usually 1 to 5 years, reducing the cost to the borrower.
Base Rate Tracker
The interest rate charged is linked to the Bank of England Base Rate which is reviewed monthly. This is similar to the Discounted Interest rate in that it reduces the cost to the borrower over the SVR.
Flexible Mortgage
Allows the flexibility to make additional repayments to repay the mortgage early. Interest is normally calculated daily.
Capped Interest Rate
The interest rate is variable but guaranteed not to exceed a certain level.
Cashback
The lender offers a cash lump sum on completion of the mortgage as an incentive. In taking a cashback, you are normally tied to the lender for a set period of time and if you redeem your mortgage early, they may ask for the cashback to be repaid.
Redemption Penalties
Where an incentive has been offered, the lender may make it a condition on the borrower that they retain the mortgage for a set number of years. If you redeem your mortgage early, they may apply a penalty. This is known as an Early Redemption Charge. |
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Other Associated Costs |
Valuation fee
This is also known as a survey fee. A lender will require a survey to be carried out to ensure that the property is adequate security for the loan being applied for. The cost will vary and is based on the value of the property. This cost is usually met by the borrower, however, as an incentive, some lenders will meet this cost. There are different types of survey and they are priced accordingly.
Legal fees
This is also known as a conveyancing fee. You will require the services of a suitably qualified solicitor to undertake the legal work associated with the purchase of a property.
Lender Fees - Application/Arrangement/
Booking/Completion/Submission/Reservation
Lenders usually charge fees to the borrower. This can be one or more of the above.
Mortgage Indemnity Guarantee premium
This is also known as Higher Lending Charge or Risk Fee. A charge applied where the mortgage is for a high loan to value. If applicable, this is normally for loans that are more than 75% of the value of the property. Many lenders no longer make this charge if a deposit of at least 10% is available. In most cases, if the charge is applicable, it can be added to the loan.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
Think carefully before securing other debts against your home.
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affinity financial planning ltd.
Independent Financial Advisors, Affinity Financial Planning Limited is an appointed representative of Financial Services Advice & Support Limited, which is authorised and regulated by the Financial Services Authority.
Company Registration Number 222052. Registered Office: 33 Kittoch Street, East Kilbride, G74 4JW. |
