Types of Mortgages

Interest only, repayment, tracked, variable, fixed and capped; what does it all mean?!! It can be very confusing to know what you are getting into when getting a mortgage so we have but this guide together to help you know the difference

What is a Mortgage?

It’s a form of borrowing to buy a property. You can either pay a little as you go (repayment mortgage) or pay it all off at the end (interest only or endowment mortgages).

Repayment mortgages

Each month you pay off some of the outstanding debt as well as interest on the loan. At the end of the mortgage term the house is paid for and you have no outstanding debt providing you have kept up with all the payments.

Interest only mortgages

With an interest only mortgage you only payoff the interest but not the capital or sum you borrowed.

At the end of the mortgage term (normally 25 years) you have to repay the capital you borrowed. This means that you must have saved up enough money elsewhere to pay back the loan. If you haven't you possibly need to sell your house to find the money.

Interest only mortgages are popular amongst buy to let investors and first time buyers because the payments are lower. Most people hope that after a few years they can start saving or change to a repayment mortgage.

Endowment Mortgages

An endowment mortgage is where you take out a separate Endowment policy which at the end of the loan team should pay off your mortgage, it also provides life insurance cover too. Relatively few endowment mortgages are sold these days due to the huge Endowment miss-selling issues in the past few years; where the endowment policies did not cover the value of the loan

If the investment performs badly, you could face a shortfall on your loan at the end of the repayment period. In the 1980s endowments were very popular and heavily marketed by lenders.

Paying the interest

There are several ways of paying interest on your Mortgages. Here are a few of the most popular.

Variable rates

The interest rate of your mortgage will go up or down depending on the current Bank of England rates. Over the past year interest rates have gone up by over 2% to there current level.

Fixed rates

The interest rate is fixed for the period agreed normally between two and five years. These are good if you think that interest rates are going increase. If rates fall you will be out of pocket. Most mortgage companies will also have a penalty if you move your mortgage away before an agreed time.

You pay a fixed rate of interest, but if rates fall you could have paid a lower rate of interest on your mortgage.

Discounted rates

Under this type of mortgage the borrower is offered a discount off the lender's variable rate. The rate paid will fluctuate in line with changes in the variable rate. The discount applies over a set term.

Shared Ownership Mortgage Deals

Take the Shared Ownership Mortgage challenge with Click n go Mortgages, we are leading Shared Ownership Mortgage Broker based in Kent and service the whole country we access the whole of the Shared Ownership market to find the best Shared Ownership Mortgage that's right for you - take a look at some of the deals we found for our happy clients.

27/01/09
Comments

Mortgage lending increases for home buyers.

In these tough times its hard to get a mortgage, there was 22,051 mortgages approved in December an increase on November’s figures according to the British bankers association. For those lucky ones who have managed to get a mortgage it’s just as important to protect your self against losing your home.

22/01/09
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Shared Ownership latest mortgage deals rates and lending criteria

With Rightmove reporting increased demand for houses and property listings at an all time low. First time buyers are struggling to save the deposits which lenders are currently insisting on to purchase in today’s market. So the alternative is to buy via a Shared Ownership scheme.

21/01/09
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Mortgage Lending ‘fell by 30% last year’

There was huge contraction in the amount of mortgage lending in 2008. The credit crunch has swept through the housing market and all but obliterated most of the mortgage deals that were available in 2007.

20/01/09
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Government announces second round of measures to provide new lending

Banks need to use these facility's to help breath life into the failing housing market as First time buyers and home movers continue to window shop.

19/01/09
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House hold demand in the pipe line

When the market does turn, first time buyers will re-enter the market, driven by the renewed affordability of owning over renting. With lenders cautious on loan to value ratios, there will be new types of shared ownership and shared equity schemes to be in high demand.

18/01/09
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Bank bail-out to help with lending

New rescue package to help bank's start lending again. Gordon Brown will announce plans to guarantee mortgage lending tomorrow.Will this be the news first time buyers have waiting for?.

15/01/09
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Mortgage lending continues to fall

The Council of Mortgage lenders (CML) have reported that their was only 33,000 new loans granted in November, that's a 17% reduction compared with last month. First time buyers are finding that they have to put down a large deposit. On average a first time buyer has to put down an 18% deposit of the properties value.

14/01/09
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How do i go about buying a Shared Equity property?

My partner and I are lowly first time buyers with a few savings, certainly not enough for a deposit. We rent our slightly shabby 2 bed house, which I long to decorate but don’t want to add value, and are slowly but surely paying off our landlords’ mortgage.

13/01/09
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House sales are still falling

RICS the Royal Institution of Chartered Surveyors said the housing market has reached a low not seen for 30 years. First time buyers are struggling to take advatange of falling house prices.