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Mortgages & Protection Invariably when you want to buy a house you will also need a mortgage. Not exactly the most interesting subject, but probably one of the most important decisions we ever make. Whilst house hunting can be fun, shopping around for a mortgage certainly isn’t. With so many lenders in the marketplace it would be almost impossible to find out what each individual bank or building society can offer you (see our quick guide below).
Due to our association with Home of Choice Ltd, our team of qualified Mortgage Advisers can access the whole of the mortgage market on your behalf, either within the comfort of your own home or in one of our branches, and offer you advice to ensure your financial arrangements are protected, e.g. critical illness, life assurance, sickness and redundancy cover.
Our advice is free, so whether you are a first time buyer, have moved several times, are thinking about putting your house on the market or simply looking to re-mortgage your current home, they can guide you through the mortgage maze. Then, when we have found the mortgage that suits your individual needs, the dedicated team at the Financial Services Administration Centre will process your application from start to finish, giving you one main point of contact and complete peace of mind.
A QUICK GUIDE TO MORTGAGES
STANDARD VARIABLE RATE
The rate normally offered to borrowers at the end of any fixed, capped or discounted period. The rate is set by the lender and will normally fluctuate roughly in line with the Bank of England Base Rate. As lenders adopt different methods of charging interest some can work out significantly cheaper than others over a period of time. You must therefore bear in mind that opting for a standard variable rate means your mortgage payments will fluctuate and could cause substantial increases in your monthly payments.
FIXED RATE
The rate is fixed for a specific period of time, with no upward or downward movements, allowing for predictable budgeting. At the end of the fixed period the rate usually reverts to the lenders standard variable rate. Some fixed rates may be ‘stepped’, i.e. at a low starting level and stepping up each year, which can be useful if you know your income will increase each year. The risks in taking a fixed rate over a long period of time are that if rates fall you will pay more than if you had chosen a variable rate and that you are normally tied in with early redemption charges. Once you come to the end of any fixed rate you could find your payments increase dramatically, so it is a good idea to review your mortgage arrangements prior to the end of the fixed rate period.
DISCOUNTED VARIABLE RATE
Usually offers a discount from the standard variable rate for an agreed period of time. As with the standard variable rate, the rate will fluctuate roughly in line with the Bank of England base rate. The rate set will typically be lower than most fixed or capped rates of comparable terms. The risk is that if lenders decide to increase the standard variable rate so does the rate you pay. However, the reverse also applies which might work to your advantage in a falling rate environment. You must remember to allow for potential increases when determining your monthly budget.
BASE RATE TRACKER
A mortgage rate linked to the Bank of England Base Rate (BBR) which is typically set at a specified amount above or below BBR, depending upon market conditions. A key point to note is that the rate is not set at the discretion of the lender but directly ‘tracks’ the BBR. The advantage therefore is that when the BBR falls, the interest charged on the mortgage will be altered immediately to reflect this and your payments decrease. However, the reverse is true when the BBR increases. Allowances should therefore be made for variances when setting your monthly budget.
CAPPED RATE
In this example there is a maximum rate set at outset and applied for a specific period of time. This provides for the same predictable budgeting as a fixed rate but with the possibility that the rate may reduce. However, the initial rate tends to be set slightly higher than a fixed rate of a comparable term. Some lenders also apply a ‘collar’ meaning that the rate cannot fall below a minimum level. Capped rate mortgages tend to be less common than fixed rates and market conditions tend to determine when they are available.
FLEXIBLE MORTGAGES
These come with varying degrees of flexibility depending on the features you require. Some enable you to ‘offset’ money in your bank accounts to reduce the overall amount of interest paid or the term of your mortgage. The key to saving interest over the term of the loan is determined by the capital rest period applied. A flexible mortgage may be calculated daily meaning that any additional payments would be calculated on the day you paid them and immediately begin to reduce your balance.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Jackson Grundy Financial Services Ltd is an appointed representative of Home of Choice Ltd which is authorised and regulated by the Financial Services Authority.
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