Mortgages in UK
UK Basic Mortgage Information
A mortgage is basically a loan, secured on the value of a property, which you pay back over a given period of time. “Secured” means that if you don’t make payments as you agreed, the lender has the right to sell your property in order to recover their money. In reality, this doesn’t happen often, especially if you let your lender know as soon as you find out you are having difficulties with the payments.
The common term of a mortgage is 25 years, but it can be over longer or shorter periods depending on your own needs. The original amount you borrow is called the capital.
Repayment This is the only way you are going to guarantee that the property is yours at the end of the term - no ‘Ands, Ifs or Buts’. What it means is that every time you hand over some dosh, you’ll pay off a bit of the interest due and a bit of the capital until the debt is completely finished.In the beginning of your mortgage, you’ll be paying mostly interest, which means if you decide to sell up in the early years, you’ll find you’ve hardly paid off any capital at all. But after a few years, you’ll be whittling away at bigger and bigger chunks of the capital.
Interest Only
Monthly payments to the lender are all interest with this kind of mortgage. You won’t pay off any of the capital during the term of the mortgage - you’ll do it at the end, having made simultaneous monthly payments into some sort of investment fund. So each month, you send one batch of money off to the lender, and another batch off to an investment fund. By the end of the term, if the stock market has behaved as it has for the last 100-odd years, you should have accrued a nice pile of cash with which to pay off the capital sum of the mortgage, plus a little extra. At least that’s the theory.
It is possible to have a combined repayment/interest only mortgage, which can be useful for those who want to increase their mortgage or who don’t want to risk the whole of it on investing in the Stock Market.
Endowments
An endowment mortgage is a sort of interest only mortgage. The endowment policy is a combination of savings, investment and life assurance all wrapped up in an insurance policy. The life assurance bit merely ensures that the mortgage is automatically paid off if you suddenly drop dead
Mortgage Interest Rate Guide in UK
Interest rates are possibly the most important part about buying a house. You want to barrow the money you need for the least possible cost, so you need to determine which type of interest rate is best for your particular circumstances.
Keep an Eye on the Latest Rates
The mortgage market is a fast-moving place. A deal that was competitive when you took it out may not be so attractive a few years down the line. So it pays to keep an eye on the latest offers available. Frequently, you can save hundreds, or even thousands of pounds, each year by remortgaging.
