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Mortgages

Mortgages

To find the best mortgage deal you need to research the whole of the market. You should be aware that while it can be tempting to always go for the lowest initial rate, this isn’t always the best mortgage. The best mortgage will depend on your individual requirements and personal circumstances.
Below are some things to consider when looking to take out a mortgage.
Speak to one of our mortgage advisers who will be able to assist.

Arrangement Fees
The arrangement fee is a fee charged by the mortgage provider for processing and putting in place your mortgage. This fee can vary from around £200 to £1000. This fee can be added to the loan in some cases and in some cases may not be charged.

Fixed Rates
A fixed rate mortgage is a mortgage where the rate is locked in for a certain period of time. For example a 2.00% 2 year fix means the interest rate on your mortgage is guaranteed to be 2%. It will not go up or down.  The main positives of this type of mortgage are that it provides peace of mind as there will be no changes to your mortgage repayments. However there are negatives as it can be possible to get lower rates with variable mortgages and there may be charges for early repayments.

Variable mortgage
With a variable mortgage, the amount you will repay each month can change depending on decisions made by the Bank of England or your lender. An example of a variable mortgage is the tracker mortgage. With a tracker mortgage, the level of repayment will track the Bank of England base rate over a certain period of time.  If the mortgage is set at 2% above The Bank of England base rate and the base rate was 0.5%, you would pay back 2.5% each month. The advantages of this type of mortgage are that if the base rate is low, the level of repayments could be lower than with a fixed rate mortgage. However this type of mortgage also means that the repayments could increase if The Bank of England Base Rate increases.  This may then be higher than a typical fixed rate mortgage.  There is no security of knowing what you will have to pay each month.

Capital versus interest repayment
With a capital and interest repayment mortgage an even amount of both the capital and interest is repaid each month and the mortgage will be repaid in full by end of the mortgage term, as long as you keep up repayments.  With an interest only mortgage, you only pay the interest element so at the end of the mortgage you still have to repay the initial mortgage loan amount. The principle here is that the money saved by having lower repayments will be invested into an investment vehicle. At the end of the mortgage term the money invested into the vehicle can be used to repay the initial mortgage amount.  The appeal of an interest only mortgage is that there will be a lower monthly repayment but there is a risk of not being able to repay the mortgage if your investment vehicle falls short at the end of the mortgage term.

Early repayment
Early repayment is where homeowners repay all or some of their mortgage before the end of the mortgage term. This is allowed with most mortgage products and is an appealing option as it removes or reduces a large monthly outgoing and that money can then be put to work. However be aware that you may incur early repayment charges during and after any initial product terms.

Equity
Equity is the value of the property which does not have a mortgage or debt against it. For example if your house is worth £100,000 and you have mortgage of £80,000 you have equity of £20,000. Equity is needed if you would like to take out further borrowing against your property.

Loan to value
The loan to value (LTV) is the amount of money you are borrowing compared to the value of the property. For example if your house purchase is £100,000 and the you require a mortgage of £80,000 because you have a deposit of £20,000, the LTV is 80%.  The lower the LTV, the better mortgage deals and wider range of mortgage products become available.

Our
mortgage advisers can be found on the IFAs page.

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