Mortgage business can be very complex and with the increase in the selection of products available can be very confusing. This article describes some basic knowledge and possible considerations when choosing a mortgage loan.

Types of mortgages

Principal and interest (repayment): On a monthly mortgage payment pays the interest of both the bond and some of the capital, so that the amount of capital (originally borrowed) gradually reduced.

Interests only: A mortgage in which only the interest paid and the capital is for the repayment at maturity of a vehicle such as ISAs, pensions, or the equipment. Thus, the amount of the loan remains relatively constant while the mortgage will be. A ‘Buy-to-let’ investor of May and the loan by selling the property themselves

Mortgage

Three types proliferate – in ceremony and offset tracker.

The observed: If the interest rate on the mortgage at the start is for a fixed time or 3 years.

Tracker Award: If there’s interest for a reference rate. For monitoring of the product, it is likely the Bank of England rate (or occasionally the London Inter-Bank Offer Rate or LIBOR), ie the base is 6%, the “tracking” of 0.15% points, so the interest to pay is 6.15%.

For a product, it is likely that the mortgage rates, known as the standard variable rate (SVR), ie the mortgage, the rate of 7, 5%, which is “promotion” of 1.35%, so that the effective interest rate payable is 6.15%. When the interest rate on these products, up or down if they do not follow. A mortgage lender, not a product, not the changes in the base rate ie to 0.25%, but the mortgage lender chooses the rate of 0.2%.

Offset: This is a flexible mortgage loan that allows a borrower to keep balances (such as mortgage, savings account and current account) in separate accounts, but for the purposes of calculating the interest, all balances are aggregated. The money for the savings or current accounts is the balance of the mortgage and only be charged on the remaining amount, ie the interest rate lowered.

Mortgage term

The traditional mortgage from 25 years is long, especially for the first buyer, the mortgage loans is now 45 years or even more! On a mortgage, the word has a direct impact on monthly payments and the total amount refunded (= long-term monthly payments smaller, but more to pay back, and vice versa, to the words shorter).

Cost

There are two major expenses in most mortgages: fresh product (which can also serve as a reservation, booking or arrangement fees) and the study (or recycling) costs.

The product costs actually paid for the selected product that is preferential to a fixed rate of interest than the lender to the SAR (see above). These costs have increased in recent times often in the region of 2.5% of the loan amount advanced. So it is wise to be careful from the charge, especially if they are on the bond, since most donors provide, making the monthly payment and the total amount refunded.

The amount of property rights investigation depends largely on two factors: the value of the property and the nature of the investigation. The three types of investigations in mortgage valuation report from the accommodation and the Structural Funds. The donors are calling for a mortgage under way to confirm who is in good enough condition to get them to the loan on their house on the report and not more in depth in addition to the benefit of customers. An investigation of the structure is probably an old, or maybe with a little for the construction. So, if you have a Victorian expensive, property investigation costs could be very big!

If a person who holds a mortgage or do not have a large deposit or a credit chessboard, some lenders a senior loan officers (HLC). In the past, for a loan of more than 75% of the value of the property, this may still undesirable thousand books with a mortgage balance if the host or the cost of the mortgage, which, if not added.

The remaining costs related to the understanding of a mortgage may Solicitor’s tax, stamp duties (house purchase) and the cost of arrangement (consultants / brokers).

3 Recommendation for a better mortgage product

1. Enter – be offering a “false”, ie the period during which a special price of products and will remain with the lender for a specified period after the expiry of for fear of account that you have a penalty for moving your mortgage.

2. Compare the products throughout their merits, not just its title to the interest rate that is a product with a low interest rate of May, a high cost, the actual costs in the long run.

3. Find independent financial advice – what better way to ensure that the best product for your circumstances, that advice from a qualified expert on the entire market available? You can also use the subtleties of the various applications for mortgage loans (not shown in this article) that is the first time home buyers moving companies, re-mortgage, self certification, the effects of the budget (sub-prime) and buy-to-let.