We are able to offer advice and recommendation on which mortgage is most suitable for you. When giving advice, we will take care to help you select the mortgage to fit your needs by asking for relevant information about your circumstances and objectives. Our advice will also depend on your particular requirements and on the market conditions at the time. The reasons for recommendation will be given to you in writing before you complete the mortgage.
There are two main methods of repaying the loan and these are as follows :
a) Interest Only Mortgages
For this type of mortgage the whole of the loan is left outstanding until the final repayment date at which point normally an endowment, Individual Savings Account (ISA) or pension policy provides the capital to repay the mortgage. There is no guarantee that the investment used to repay the loan will provide sufficient capital but the lower the growth rate assumed on the underlying investment the more likely the investment will provide the required capital or indeed a surplus.
If you fail to make suitable arrangements to repay the mortgage then you will be liable for the full sum on the date of repayment. At the outset of the loan we will satisfy ourselves that you have an adequate repayment method in place but it is your responsibility to ensure that this remains the case.
It should be noted that the early surrender of most investments used may result in you receiving back less than you have paid in, in addition, changes in your personal circumstances, for example, long term sickness or relationship breakdown, can have adverse consequences depending on the type of mortgage or investment used.
b) Capital Repayment MortgageWith this type of mortgage a small amount of the capital is repaid each month together with the interest on the outstanding loan. The prepayments are calculated so as to remain level assuming interest rates remain the same. Very little capital is repaid in the early years as most of each month’s payment is made up of interest but the amount of capital repaid by each payment increases gradually throughout the mortgage term.
With all of the above methods of repayment, it may be advisable, and in some cases a condition of the loan, that there be a life policy effected to ensure that the mortgage is repaid in the event of the death of the borrower(s).
Types of Interest Rates Availablea) Variable - This simply means that the interest that you pay to the lender is the lender's
current full variable rate and will rise and fall according to market conditions and the lenders lending policy. This is often combined with a cashback facility as an incentive.
This means the lender provides you with a cheque for a fixed amount as a gift, on or after the completion of the loan as an incentive for you to place the mortgage with them.
b) Fixed - This means that the interest paid to the lender is stays the same, normally at a lower rate than the normal variable rate, for a certain period of time. The lender will not vary this rate until the end of the fixed rate period when you will normally revert to the lender's standard variable rate.
c) Discounted - With this type of mortgage, the lender charges you a certain amount less than their normal variable rate and thus if the variable rate goes up your mortgage repayment will go up and vice versa. The discounted rate therefore follows the standard variable rate but at a lower level for the discount period after which you will revert to the normal rate.
d) Capped Rates - This is where the interest that you pay to the lender is guaranteed not to go above a certain level for a certain period. This means that if the standard variable rate falls below the capped rate, the amount of interest that you pay will reduce. However, if the normal variable rate increases above the capped rate, you will only pay the capped
rate specified. The rate is normally capped for a certain period of time after which you will revert to the normal rate.
We will provide a mortgage illustration of the future potential repayments during the offer period, (if any), and the future potential repayments at the end of the offer period based on the current variable mortgage interest rates which of course is liable to change in the future. The mortgage illustration also shows us the following details :
- A Description of any insurance which is required to be taken out as a condition of the loan, for example, buildings, contents, or mortgage payment protection insurance, which it is your responsibility to arrange direct with the lender.
- Details of the costs and fees and other charges in connection with the mortgage which may be payable by you.
Early Redemption Penalties
With most "special offers" the lender will seek to ensure that you do not repay all or part of the mortgage, at the very least before the end of the special offer period, and sometimes even for a number of years afterwards even when you have reverted to the normal variable rate.
It is important to realise that though you will normally be able to move house during the period during which the penalty applies, you will not be allowed to reduce the size or repay your mortgage, without incurring the early redemption penalty. On occasions the penalty can be a considerable sum making early repayment of the loan a very unattractive proposition. In most cases the early redemption penalty will also apply if you move to an alternative rate/deal with the same lender or alternative lender.
Mortgage Indemnity Guarantee Premium
If your mortgage represents a high percentage of the purchase price, or valuation of your property, you may have to pay a higher percentage lending fee, also called a Mortgage Indemnity Guarantee Premium. Some or all of this fee may be used by the lender, at its discretion, to obtain mortgage indemnity insurance to act as an extra security for the lenders sole benefit.
If a higher percentage lending fee is required the lender will give you a written explanation stating that such an insurance will not protect you if your property is subsequently taken into possession and sold for less than the amount you owe. You will remain liable to pay all sums owing, including arrears, interest and your lender's legal fees, and if a claim is paid to your lender under such insurance, the insurers generally have a right to recover this amount from you personally.
Fees and ChargesAs mortgage intermediaries, some lenders pay us an introducer fee of anything up to £250. If the introducer fee is more than £250 we will disclose the exact amount to you. This payment is entirely between the lender and ourselves and does not involve you in any additional cost than were you to go to the lender direct.
Data Protection AccessWe draw your attention to the fact that you have a right under the Data Protection Act 1984 to copies of your personal records held on our computer files.
ComplaintsWe have internal procedures for handling complaints fairly and speedily which you will see on our terms of business which you will find on the back of our headed notepaper. Should you still be dissatisfied you have available to you the Financial Services Onbudsman scheme details of which are available on request.
Credit Reference AgencyYou should be aware that as soon as your application for a mortgage has been submitted to a lender they are likely to conduct a credit search to determine your credit history. In addition, once the mortgage has completed, credit reference agencies will be informed that you have the mortgage outstanding.