Switching your mortgage product is much easier now than it was before. Historically, home owners would stick to their mortgage provider and keep the same mortgage for the full term, usually 25 years. Since the market has changed, it is now far easier for all of us to switch products and lenders, even those applicants with adverse or bad credit.
The choice of provider and the terms and conditions make what seems a complicated process even harder to follow. Many people prefer to appoint an independent financial advisor to use their knowledge of the market and its product providers. High street banks and building societies generally offer their mortgage services but many people choose neither of these options and approach specific lenders direct. When our financial circumstances alter due to a job change or prolonged illness. We can alter our preferred payment strategy and often pay the entire mortgage off early. You could opt to pay interest only for a while or take out a re mortgage and spend some of the equity on home improvements or a holiday. Below is a brief explanation of the main types of mortgage on offer.
First Time Buyer
It has always been tough for anyone to get their foot on the property ladder for the first time but you can't argue that for the past 6 years at least, it has been harder than ever before. One minute you read that the number of first time buyers entering the market is the lowest number for 40 years and the next report say's they are making a comeback and the numbers are increasing.
Entering the mortgage market at the right time when the market is flat and sellers are keen to sell a property is the best time to buy. You could try looking for good deals direct from developers on new builds as well as keeping an eye on interest rates. The increase of the stamp duty entry level to £120,00 will help some buyers but the emergence of the 35 year old first time buyer looks less then encouraging.
Fixed Rate
A straightforward and reliable product and popular with first time buyers and those on a tight budget who prefer the stability of a set monthly repayment. Whatever happens to the base rate, your monthly repayments remain the same for the duration of the mortgage deal. When interest rates are low they are a good bet.
Capped Rate
This product is a compromise between fixed-rate and variable rate. There is a fixed upper limit to the amount of interest charged on your homeloan. If the base rate falls the interest charged on it remains in line with it and will also fall. Capped rate mortgages combine the best aspects of fixed and variable rate mortgages. The cap will not last the entire lifetime of the mortgage, five years is usually the longest but you could find one that lasts up to 10 years.
Remortgage
Remortgaging or refinancing is like taking on a new mortgage but without buying a new home and moving. You can still choose the rate you will pay, the repayment method and type of product. You will be taking out a new mortgage to repay the old one. You do not have to move from your original lenders but you will need to pay fees and have your home valued. You may have your fees returned if you choose to use your lenders recommended surveyors and solicitors.
Discount
Lenders offer an initial discount off their standard variable rate. This will then revert to the standard variable rate once the set period of discount has elapsed. In a low interest rate period, this can have the effect of making a larger mortgage look more affordable. The length of the mortgage term can vary from one up to ten years. You should always read the small print, these products will often come with penalties attached ie a fee you pay if you move your mortgage to another lender or type, or tie ins - the period of time you have to remain with that mortgage.
100% Mortgage
Now widely available, you used to have to put at least 10% - 5% down as a deposit, with some lenders lending additional funds to cover the cost of stamp duty or fees. These do not always come with the cheapest of interest rates. The rates could be fixed or variable and the emergence of 110% mortgages makes it even more important to be sure of your liabilities.
Buy to Let
These used to be available through a small core of 8 specialist lenders. Buying a property as a principle residence and then renting it out privately is against the rules of most conventional mortgages. The mortgage works the same way as any other mortgage, you need to pay a deposit which is usually 15% to 20%. The rental income would usually need to be between 100% to 150% of the mortgage repayments. Some lenders will only lend up to ten times the predicted annual rental income.
Adverse Credit
The saviour for many people who have CCJ's, this is a bad credit product designed to help people with poor credit to buy a property. This mortgage is now available from high street lenders as well as the specialist providers. The interest rate may not be the most competitive on the market. Adverse credit is graded into 'Heavey', 'Medium', or light. If you build up a good repayment history with your lender, usually for around three years, you may be able to remortgage to a standard product.
|
