SERVICES

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  Repayment Methods for your Mortgage

  Once their mortgage application has been accepted in principal, the borrower may have the option of deciding how he or she repays their loan: on a ‘capital and interest’ basis, or on an ‘interest only’ basis.

  Capital and Interest Mortgages

  An arrangement where part of the monthly repayment is used to pay the interest and the remainder is used to reduce the original amount of the loan. In the early years of the mortgage, most of the monthly repayment goes towards paying the interest; in later years, the proportion of the payment that is interest reduces (as more of the capital is repaid) and more of the repayment is available to reduce the loan amount.

  Interest-only Mortgages

  Interest only mortgages are a type of mortgage where the regular payments only cover the interest that is due. The full capital amount remains outstanding during the mortgage term and is repaid in one lump sum at the end of the term.

  Lenders require evidence that a customer will have in place a clear credible repayment strategy and that the repayment strategy has the potential to repay the capital borrowed.

  Repayment strategies may include investment product(s), pension(s), periodic repayment of capital from irregular sources of income (i.e. bonuses), the sale of another property or other land or other acceptable methods which meet lending criteria. It will not normally be appropriate to use deposit accounts as a repayment strategy as the rate of interest charged on the mortgage is normally greater than the interest earned on the deposit.

  This means that the mortgage payments made each month to the lender will be lower than those of a repayment mortgage for a similar loan and term. However, borrowers must remember that the cost of their repayment vehicle/strategy needs to be taken into account when calculating the overall costs of the mortgage arrangement and especially when comparing those costs to the cost of borrowing on a capital & interest basis.

  Having decided on the loan repayment method, the borrower then needs to consider what kind of mortgage they want. The main options, some of which may or may not be available depending on the mortgage market and general economic conditions prevailing at the time, are described below.

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  First Time Buyer

  The prospect of buying your first home could be both daunting and confusing. Our aim is to guide you through the process from start to finish so that you understand exactly what the purchase entails and how much it will cost. There are actually some advantages to being a first time buyer. First time buyers are more appealing to sellers because they are not in a chain.

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  Fixed Rate Mortgages

  The interest on the loan will neither rise nor fall for a pre-determined period of time. Although the monthly repayments will stay fixed, if interest rates fall, the borrower could potentially end up paying more than he or she would on another type of mortgage.

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  Standard Variable Rate Mortgages

  The monthly mortgage repayments are based on the prevailing rates of interest the lender charges - not the Bank of England (BoE) base rate. In other words, it is entirely the lender’s decision on the rate of interest they charge the borrower.

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  Remortgaging

  THINK CAREFULLY BEFORE SECURING YOUR DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

  Whether you are looking at consolidating your debts, raising money for home improvements, looking for a better monthly payment than you currently have, or want to restructure the terms of your current loan, we can help.

  Remortgaging can help your financial health in many ways. In simple terms, remortgaging involves moving your current mortgage to a new arrangement, arranged either with your existing lender or with a new lender.

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