Mortgages
Our experienced and qualified advisors will work with you to provide tailored advice about the right type of mortgage.
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Release cash from your home without having to move.
RESIDENTIAL & BUY TO LET
As a specialist broker we can provide a range of mortgage options for customers with complex circumstances and requirements.
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We can help you finance your next venture.
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Buy-to-let mortgages will help you make a success of building your portfolio.
For many people, finding the best mortgage isn’t quite as straightforward as people would like to think it is.
Mortgages have three main repayment options:
1. Capital Repayment
Each monthly payment is made up of interest on the outstanding loan and capital (the loan itself). In the early stages, each payment will be almost entirely interest but each month, as more capital is repaid, the interest goes down. Unless the interest rate changes, repayments remain the same so gradually more and more of each payment is capital until it is all repaid. If you make every payment in full when it is due on a repayment mortgage it will be paid off in full at the end of the mortgage term.
2. Interest Only
Each month you pay the interest due but nothing else. That means you pay less each month but continue to owe the full amount you borrow and, sooner or later, you will need to find the money to pay the lender back. You should only take out an interest only mortgage if you have a realistic plan to pay it off and are willing to accept the risk that if the plan does not work you may have a problem later.
3. Offset Mortgages
An offset mortgage is linked to a bank account. Each month money comes in, typically a salary payment, and your loan is reduced then, as you spend money, it goes up again. The advantage of this approach is that you only pay interest on whatever you are borrowing at the time so you the interest paid is reduced. The interest cost saved is generally more than you could earn in a savings account (and there is no tax on the saving). However, not all lenders provide offset mortgages and the interest rates can be higher. The main drawback, though, is that you need to discipline yourself not to keep borrowing back too much. Otherwise, you could reach the end of the mortgage term and find you still we a lot of money and have no way of repaying it. So offset mortgages are only a good idea if you can discipline yourself with your finances.
The interest on most loans is calculated on one of three bases:
Normal Rate
This is the lender’s normal rate which will be charged if there are no special factors which might cause it to charge a different rate. This will not be directly decided by any particular rate but the lender will consider all of its costs such as interest it pays to savers, administrative and regulatory costs.
A lender may also offer discount on its standard variable rate to attract new business. It might also wish to make sure loans that it thinks are low risk are not moved elsewhere. The discount might be for a set period or for the life of the mortgage. On the other hand, it might charge a higher rate if it thinks a borrower is a higher risk.
Tracker Rate
The interest charged on a Tracker Rate mortgage is decided by referring to a particular rate. For example it might use the Bank of England Base Rate plus (or sometimes minus) a set percentage.
Most Tracker Rates have an end date after which you will return to the Standard Variable Rate.
Fixed Rate
You can choose to fix your interest at a set rate. This will normally be for a fixed time rather than the entire life of your mortgage and at the end you will go on to the Standard Variable Rate. The main advantage of this is that you know what you will pay and are protected from increases. The disadvantage is that if rates go down, you will have to continue to pay the higher rate. Once you choose a fixed rate mortgage you are normally committed to it because your lender will charge a penalty for paying it off early.
Think carefully about what you will do if interest rates go up in the future. This is really important if you have a discounted or low fixed rate in the early years.
Our top tips for when considering a mortgage.
The first thing to remember is that a mortgage is not a gift, it is a loan. Every penny you borrow will have to be paid back one day.
The second is that you do not really ‘borrow’ the money at all – you ‘hire’ it. The only difference from other things you might hire is that the ‘rent’ is called ‘interest’. But like anything else you hire, the interest (or rent) has to be paid until it is given back.
The third one is that the mortgage is not really the loan, it is a document that says if you don’t pay the interest or pay back the original loan in the way you agreed to, the lender can apply to a court to have you evicted – so that it can sell your home and hopefully get its money back. That is why you will see documents which say ‘your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it’.
Remembering these three points will help you to understand why certain things can or cannot be done – and why advisors will take certain actions.
How much can I borrow?
Remember the more you borrow the more you will have to pay back and the more interest you will have to pay. In the end, it is the lender that has the final say, though. They will not lend to you unless they are fairly sure they will get their money back. So they will assess whether you can afford the repayments.
They will also want to know that, if things go really wrong, they can sell your home and get their money back. So they will also check that the house can be sold for enough money to do that.
Only once they have satisfied themselves on both those points will they lend to you.
Non-status Mortgages.
Non-status mortgages can be offered to those who, for legitimate reasons, cannot provide full evidence of their earnings. Do not give in to the temptation to use a non-status mortgage to exaggerate your income in order to borrow more. Lenders place limits on how much they will lend to protect you from taking on more than you can manage. If you overstretch yourself you could lose your home. It is also fraud.
Remember, you are renting the money so the longer the loan runs the more you will pay. On the other hand, the faster you repay it, the more you must pay off each month so you need to reach a compromise.
Typically, a term of 25 years might be suggested for your first home but you may choose a longer period if a lender agrees to it.
Generally, it is a good idea to make sure the mortgage is cleared by the time you retire.
If you are moving, you can choose to run your new mortgage to the time the old one would have ended but you do not normally have to.
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No matter how complex your needs, speak to one of our experienced advisors in confidence