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Mortgages can be confusing, so here at the Homeowners Club we’ve explained them, step by step so they’re easier to understand.
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What is a mortgage?
A loan you take out from either a bank or building society or a specialist mortgage lending company to buy a property. The FSA (Financial Services Authority) regulates the way most mortgages are sold, therefore certain rules and standards must be followed.
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How to choose a mortgage?
Following information and advice choose a mortgage that suits your particular needs. This can be either direct from the lender (banks, building societies etc) or you may choose to use a mortgage broker.
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How does the repayment work?
You have two main options here;
Repayment – monthly repayments for a pre-determined term until you have paid the loan plus interest.
Interest only – monthly repayments for an agreed term that will only cover the interest on your loan. In addition you may be required to make payments into another savings or investment plan to ensure your loan is paid off at the end of the term.
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What flexible options are available?
Some mortgage lenders will give you the option to vary your monthly repayments or to combine your mortgage with savings and other incomes. These are called flexible, current account and offset mortgages.
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What are the different interest rates available?
Variable and tracker rates – Change according to the Bank of England rates.
Fixed rates – Set for a number of years.
Capped rates – A variable interest rate with a ceiling so your payments can’t go over a set amount.
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Do I need insurance?
Protection Life Cover – You may be required to take out life insurance to ensure your mortgage is paid if you die.
Mortgage Payment Protection Insurance – This insurance will protect your income or your repayments should you become ill, disabled or lose your job.
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To get a quick idea of what you might expect your monthly payments to be, try out our free mortgage calculator below. A quick and easy way to calculate your monthly mortgage payments. Simply enter the amount you wish to borrow, the term over which you intend to pay it off and the interest rate. Then hit the calculate button.
These figures are only a guide. We recommend that you obtain exact figures from a specific lender before committing to any mortgage.
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