| Unless
you happen to be a financial adviser, mortgage consultant, investor,
or you hobby is finance, the first time you will ever think about
a mortgage is when you buy your first property. The world is filled
with people who wish they had chosen the right mortgage the first
time round, with a little research and checking out a few lenders
you can avid the pitfalls of those before you.
Mortgages
are no big deal and are not difficult to learn about but they
can seem confusing and daunting to the first time buyer. So we
have put together a few basics to help you understand what lenders
are talking about when you walk through their door.
MORTGAGE
TYPES
There are
thousands of individual mortgages on the market but they can be
categorised into just a few types, each type represents the way
you pay back your loan to your lender so what are they, and what
are the advantages of each.
STANDARED
VARIABLE RATE
Most lenders
well almost all lenders have a Standard variable rate (SVR) usually
this is their advertising rate the eye catching rate. You can
compare this rate with other companies the SVR rate moves up and
down in line with the Bank of England's Base Rate. Usually you
can get a better initial rate than the SVR, if you take a discounted
rate you will be moved onto the lenders SVR after the offer period.
FIXED
RATE.
Fixed rate
mortgages give you the piece of mind in knowing that for a fixed
term your repayments will remain the same, the interest rate is
fixed for a set period of time generally the longer the term the
higher the rate. With a fixed rate mortgage, the monthly repayments
will always stay the same so you are protected from the rise and
fall of interest rates. For the first time buyer a fixed rate
mortgage could be a good idea you will be able to budget for the
next few years being reassured that your monthly repayments will
stay the same.
CAPPED
RATE
Even for
the experts it is difficult to predict if the interest rates are
going to rise, fall, or stay the same. If you opt for a capped
rate deal this means you put an initial ceiling on the rate you
pay, so you will benefit if the rate goes down, but have the security
of knowing it will not go above the cap. You will need to weigh
up the best deal between the fixed rate and a capped rate if you
are thinking of the option.
DISCOUNT RATE
This type
of mortgage provides a discount off the lenders SVR for a given
period of time, this time will vary but generally speaking the
shorter the deal lasts the greater your discount. There is usually
a redemption penalty with this type of mortgage, which will often
last the period of the discount. However if the discount is particularly
generous you might be tied in even longer.
CASHBACK
Now days
you can actually receive money from your lender to help with initial
moving in costs. It is important to remember with these products
you are not being given anything, the money you get back will
effectively be added to the loan because you won't get such a
good rate, and you could be tied into the lender at a higher rate
for longer.
FLEXIBLE
MORTGAGES
The flexible
part of a flexible mortgage applies to the way you pay it back,
you can make under payment over payments and even skip payments
altogether add additional sums to your mortgage and benefit from
interest calculations, all without incurring redemption penalties
if you leave. Some of these options are useful to the first buyer
such as under paying if thing are tight. But usually you will
be required to have overpaid by as much as you want to underpay
so as result flexible mortgages might be best suited to someone
who has been paying off their mortgage for a while.
OVERALL
VIEW
This guide
has been written to give you brief information of the types of
mortgages that are available, all depend on your financial circumstances.
It is now time to seek professional advice from a good mortgage
consultant or bank manager, discuss with them all the types of
mortgages that may available to you and take some time to consider
your best options.
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