1. What are the different types of mortgage? a quick guide...www.moneysavingchallenge.com
2. Sometimes the choice of mortgages available on themarket can be overwhelming...Repayment Endowment Variable First time buyer Interest only Cashback Fixed 100% Buy to let Offset Tracker
3. But in reality there are two main types of mortgage Repayment Interest only and this is how they differ...
4. Repayment mortgage £0 No money owed at the end Initial loan Loan and interest repaymentsInterest only mortgage Initial loan still to be Initial loan Just interest repayments repaid at the end
5. Repayment mortgages also come in two flavours Repayment Fixed rate Variable rate
6. Fixed rate mortgage 5 years* 25 years* Interest rate is fixed Interest rate becomes variable for the remainder of at 5%* the mortgage term* Percentage rate and length of the fixed rate will vary depending on the deal offered by the mortgageproviderProvides peace of mind knowing your mortgage repayments will never increase during thefixed period.However you wont benefit from interest rate reductions, may need to pay more money tohave the rate fixed and may need to pay higher exit fees if you decide to repay themortgage early.
7. Variable rate mortgage (a.k.a. tracker mortgage) 30 years* Interest rate varies throughout the mortgage term* Length of mortgage will vary depending on customer requirementsAlso known as a tracker mortgage, the interest rate will rise and fall broadly in line with therate set by the Bank of England.Can be cheaper than a fixed rate mortgage, but has higher risk levels as your mortgagewill become more expensive if interest rates rise (e.g. a rise in interest rates from 3% to6% will increase monthly repayments on a £150,000 loan by £255).
8. Many mortgage providers have particular deals for specific niche customers But they still fall into the following two categories Repayment Interest only
9. Repayment Interest onlyFirst time buyer 100% Buy to let Endowment Cashback Offset The next few slides provide a brief overview of these common deals...
10. First time buyer mortgage 5% Different providers offer different packages, but common themes include: - Reduced deposits (e.g. 5%) - Parent guarantees - Shared ownership - Buying with friends For the mortgage providers, the risk is often offset against higher interest charges or financing from government-backed schemes.
11. 100% mortgage Mortgage DepositPopular before the credit crunch, 100% mortgages placed all the risk on themortgage provider, which meant the interest repayments would be astronomical!
12. Cashback mortgage Deposit £££Provides cashback to pay for home buying costs beyond the deposit, such as- Stamp duty- Conveyancing fees- SurveysUseful if you can only just scrape together a deposit, but remember this is notfree cash, it will just be added to your future interest payments.
13. Offset mortgage By combining your savings and mortgage account, an Savings offset mortgage enables you to reduce the amount of money you owe to the bank. This means you pay less interest each month. Mortgage You can still withdraw your Mortgage savings from the account, but will then pay more interest as the size of your mortgage increases. Monthly repayment Monthly repayment £650 £600
14. Buy to let mortgage 40% deposit Mortgages for property investors. Normally require a minimum 40% deposit and for the rental income to adequately cover the mortgage repayments. Can be repayment or interest only.
15. Endowment mortgage 30 years* Interest only mortgageValue Endowment policy * Length of mortgage and endowment policy will vary depending on customer requirements Need to ensure the investments in the endowment policy increase in value to be able to pay-off the mortgage at the end of the term.
16. To find out how to structure yourfinances, save a deposit and find a mortgage to buy your own home, visitwww.moneysavingchallenge.com