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Mortgage Choices

Which mortgage should you choose?

When considering what kind of mortgage you want, you will want to consider the deals on offer and their advantages. Mortgages usually offer one or more of a number of ‘core’ features, listed below:

• Standard variable rate (SVR)

Most borrowers are transferred to their lender’s SVR once their initial, promotional rate period comes to an end. This is usually the most expensive of their lender’s rates, and the rate from which many people choose to switch to a new product elsewhere.

• Fixed Rate

A fixed rate loan charges a set rate of interest for a predetermined period, and then usually reverts to the lender’s SVR. This kind of loan offers you the security of knowing how much you’ll be repaying during the initial period, and can make budgeting much easier. But repayments may prove more expensive than a discount rate initially, and may also become uncompetitive later on, depending on how interest rates move over the period of the fixed rate.

• Capped rate

A capped rate product offers similar security to a fixed rate – since the rate you pay during the capped period won’t exceed the capped rate – as well as the chance to benefit from any fall in mortgage rates within the capped period. However, the benefits of capped rate mortgages usually come at a price: rates are often higher than on lenders’ comparable fixed products, and the initial term seldom lasts longer than two or three years.

• Discount rate

A discount mortgage offers a reduction of a given amount on the lender’s SVR and if this rate changes, the rate you pay will fluctuate in line with it. Usually, the shorter the discount period is, the greater the discount. After the discount finishes, the loan reverts in most cases to the lender’s SVR.

• Tracker

Trackers give borrowers the certainty of knowing the rate will move either up or down automatically in line with Bank Base Rates. This allows the borrower to benefit straight away from any cuts in these rates, even if, as is often the case, the lender delays reducing its SVR to reflect the reduction. Many trackers also offer flexible terms.

• Cashback

A cashback mortgage pays an upfront lump sum, thereby allowing a borrower to pay for, say, home furnishings or to repay credit card debts, or to put down a deposit. The rate paid is most often the lender’s SVR however, it could be higher and early redemption penalties could apply.

• Droplock

A droplock mortgage is a discount or tracker mortgage which has an option to switch to a fixed rate at any point within the initial period without paying early repayment charges (also known as ‘redemption penalties’). This provides an ideal way to benefit from base rates when they’re low, with the option to switch easily to the protection of a fixed rate should interest rates then look set to rise significantly.

Your home may be repossessed if you do not keep up repayments on a mortgage.

Additional features

In addition to the core features listed above, mortgages can offer one or more additional features, such as:

• Flexible

A flexible mortgage allows you to vary your monthly repayments to reflect your changing financial circumstances. Depending on the flexibility of the product, you can, without penalty:

over- or under-pay, and/or

repay lump sums, and/or

take a payment 'holiday' to allow you to fund a large expense, such as a wedding or new car.

Payment holidays and underpayments are, of course, conditional – usually on the borrower adhering to, or exceeding, a predetermined repayment schedule. And many deals, even if not fully flexible, still offer the ability simply to overpay.

• Current account

With a current account mortgage, your current account and mortgage are effectively merged, and your salary can be paid into your mortgage account. Interest is calculated on a daily basis, and when you pay money into your account the overall loan size is lowered, thereby reducing the amount of interest paid.

Please note, money can be withdrawn from the current account and this could increase the outstanding mortgage balance.

• Offset

Like current account mortgages, offset products allow you to offset the balance of your mortgage against any funds in a savings and/or current account held with the same lender, and pay interest (calculated on a daily basis) on the net balance between the accountsWhen it comes to buying a home, some lenders can take on a rather sanctimonious attitude. They want to deal only with those who have faultless credit histories, perfect work records and adequate deposits. But money problems can affect everyone. Adverse credit problems can be linked to a loan default, county court judgements or being a discharged bankrupt.



Sometimes people get into debt through no fault of their own and, even if they have been to blame, want to sort things out. Certainly no-one taking out a mortgage wants to see their property repossessed. 

However, there is some good news in that some lenders are willing to provide adverse credit mortgages. Deals are unlikely to match standard mortgages; lenders in the adverse credit market - which is also sometimes described as 'sub-prime' or 'non-conforming' - will charge higher rates.

While the lenders clearly want to keep some degree of separation between their standard and adverse credit divisions, the deals they are offering are less punitive than in the past.  And, after three years, it may be possible to switch to a standard loan.



Your application will be thoroughly vetted and the interest set according to the risk the lender believes you pose.  You may also be subject to redemption penalties, but these should cease to apply after three years.



A mortgage may not be available in all cases, but we'll always try our best.

Your home may be repossessed if you do not keep up repayments on your mortgage.

 

 

 

 

Mortgage Choices

Which mortgage should you choose?

When considering what kind of mortgage you want, you will want to consider the deals on offer and their advantages. Mortgages usually offer one or more of a number of ‘core’ features, listed below:

• Standard variable rate (SVR)

Most borrowers are transferred to their lender’s SVR once their initial, promotional rate period comes to an end. This is usually the most expensive of their lender’s rates, and the rate from which many people choose to switch to a new product elsewhere.

• Fixed Rate

A fixed rate loan charges a set rate of interest for a predetermined period, and then usually reverts to the lender’s SVR. This kind of loan offers you the security of knowing how much you’ll be repaying during the initial period, and can make budgeting much easier. But repayments may prove more expensive than a discount rate initially, and may also become uncompetitive later on, depending on how interest rates move over the period of the fixed rate.

• Capped rate

A capped rate product offers similar security to a fixed rate – since the rate you pay during the capped period won’t exceed the capped rate – as well as the chance to benefit from any fall in mortgage rates within the capped period. However, the benefits of capped rate mortgages usually come at a price: rates are often higher than on lenders’ comparable fixed products, and the initial term seldom lasts longer than two or three years.

• Discount rate

A discount mortgage offers a reduction of a given amount on the lender’s SVR and if this rate changes, the rate you pay will fluctuate in line with it. Usually, the shorter the discount period is, the greater the discount. After the discount finishes, the loan reverts in most cases to the lender’s SVR.

• Tracker

Trackers give borrowers the certainty of knowing the rate will move either up or down automatically in line with Bank Base Rates. This allows the borrower to benefit straight away from any cuts in these rates, even if, as is often the case, the lender delays reducing its SVR to reflect the reduction. Many trackers also offer flexible terms.

• Cashback

A cashback mortgage pays an upfront lump sum, thereby allowing a borrower to pay for, say, home furnishings or to repay credit card debts, or to put down a deposit. The rate paid is most often the lender’s SVR however, it could be higher and early redemption penalties could apply.

• Droplock

A droplock mortgage is a discount or tracker mortgage which has an option to switch to a fixed rate at any point within the initial period without paying early repayment charges (also known as ‘redemption penalties’). This provides an ideal way to benefit from base rates when they’re low, with the option to switch easily to the protection of a fixed rate should interest rates then look set to rise significantly.

Your home may be repossessed if you do not keep up repayments on a mortgage.

Additional features

In addition to the core features listed above, mortgages can offer one or more additional features, such as:

• Flexible

A flexible mortgage allows you to vary your monthly repayments to reflect your changing financial circumstances. Depending on the flexibility of the product, you can, without penalty:

over- or under-pay, and/or

repay lump sums, and/or

take a payment 'holiday' to allow you to fund a large expense, such as a wedding or new car.

Payment holidays and underpayments are, of course, conditional – usually on the borrower adhering to, or exceeding, a predetermined repayment schedule. And many deals, even if not fully flexible, still offer the ability simply to overpay.

• Current account

With a current account mortgage, your current account and mortgage are effectively merged, and your salary can be paid into your mortgage account. Interest is calculated on a daily basis, and when you pay money into your account the overall loan size is lowered, thereby reducing the amount of interest paid.

Please note, money can be withdrawn from the current account and this could increase the outstanding mortgage balance.

• Offset

Like current account mortgages, offset products allow you to offset the balance of your mortgage against any funds in a savings and/or current account held with the same lender, and pay interest (calculated on a daily basis) on the net balance between the accounts


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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.

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