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	All about mortgages Understanding the many different mortgages can be a confusing business unless you take professional advice. Obviously you'll want to know what is a suitable mortgage for your needs. It isn't quite as simple as choosing the lender who is offering the lowest interest rate at the time. You also need to think about other factors such as: Do you plan to move again soon? Would you like a fixed rate scheme? Will you have to pay a Mortgage Indemnity Guarantee Premium? All of which could make a big difference to the amount you pay in the short and long term. A mortgage lasts on average seven years before it is altered, so it is worth thinking about your long term plans, and choosing the mortgage which most closely meets your needs. If you are unsure seek clarification from a financial advisor. Repaying your mortgage There are basically two types of mortgages: Repayment (or Capital and interest), and interest only. Repayment mortgage With a repayment mortgage you pay part interest and part capital repayments to the lender each month and in this way the capital debt outstanding is reduced until the loan is repaid. Interest only mortgage With an interest only mortgage it is usual to use an investment to repay the loan at the end of the mortgage term and in the meantime interest is paid to the lender on the outstanding balance. The debt remains the same while the value of the investment should increase, usually over a specified term, when the value should equal or exceed the orginal debt. The most common forms of investments used are endowments or personal pensions. Some lenders are able to offer a combination of the above which may be more suited to your individual circumstances. The mortgage maze In addition to the typical variable interest rate, there are many different schemes available: Fixed, Discount, Cap and collar, Deferred, Flexible or even a combination of some of the above! Variable rate This is probably the most common type of loan. The interest rate that you pay goes up and down in line with interest rates in the economy as a whole. When the interest rate goes up, the amount that you have to pay also rises, and it falls when interest rates come down. Fixed rate The rate is fixed for a specified number of years, so you know what your payments will be over that period. Following this period, the rate will usually revert to the lender's standard variable rate. Speicial fixed rate schemes are often available for the first time buyers. Capped rate This has similar advantages to a fixed rate as the interest rate will not rise above the cap. These schemes may sometimes include a collar or minimum rate level which is the level the rate will not fall below. Discounted rate A discounted rate gives you a reduction of, for example, 2% off the variable rate for a specified period. So although the rate may rise and fall, you will be paying less than the standard variable rate. Flexible mortgage A more recent innovation, these give various benefits which usually include the ability to vary monthly payments in line with your changing circumstances. They may also allow you to take 'payment holidays' and to borrow back any overpayment you have made. Because of their flexible nature and the variety of chemes available it is not possible to give a full description here, but your independent financial adviser will provide more ditail if you are interested in this type of loan. Cash back Some loans offer a lump sum which is paid out following completion, with a mortgage charged at the lender's variable base rate. Smaller cash backs may be offered with reduced rates and other incentives as a combination package. It's important to remember that, although the interest rates on some special schemes may look low, other factors such as arrangement fees and early redemption fees could mean you end up paying more in the long run. APR All lenders have to quote an Annual Percentage Rate (APR) in addition to their standard interest rate. This is to help you compare different schemes. The APR can be confusing but, as the calculation of APR takes into account other costs such as the arrangement fee and indemnity premium, it gives a more accurate indication of which mortgage is likely to be most expensive. However, beware of relying too heavily on the APR as a true method of comparison. Although the principle is the same, different lenders use varying assumptions for their calculations. Your Home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. A life Assurance Policy may be required. Full written details including a quotation are available on request. All loans are subject to status, and the type and value of the property. Loans are not available for persons under 18 years of age.

All about mortgages

Understanding the many different mortgages can be a confusing business unless you take professional advice. Obviously you'll want to know what is a suitable mortgage for your needs. It isn't quite as simple as choosing the lender who is offering the lowest interest rate at the time. You also need to think about other factors such as: Do you plan to move again soon? Would you like a fixed rate scheme? Will you have to pay a Mortgage Indemnity Guarantee Premium? All of which could make a big difference to the amount you pay in the short and long term.

A mortgage lasts on average seven years before it is altered, so it is worth thinking about your long term plans, and choosing the mortgage which most closely meets your needs. If you are unsure seek clarification from a financial advisor.

Repaying your mortgage
There are basically two types of mortgages: Repayment (or Capital and interest), and interest only.

Repayment mortgage
With a repayment mortgage you pay part interest and part capital repayments to the lender each month and in this way the capital debt outstanding is reduced until the loan is repaid.

Interest only mortgage
With an interest only mortgage it is usual to use an investment to repay the loan at the end of the mortgage term and in the meantime interest is paid to the lender on the outstanding balance. The debt remains the same while the value of the investment should increase, usually over a specified term, when the value should equal or exceed the orginal debt. The most common forms of investments used are endowments or personal pensions. Some lenders are able to offer a combination of the above which may be more suited to your individual circumstances.

The mortgage maze
In addition to the typical variable interest rate, there are many different schemes available: Fixed, Discount, Cap and collar, Deferred, Flexible or even a combination of some of the above!

Variable rate
This is probably the most common type of loan. The interest rate that you pay goes up and down in line with interest rates in the economy as a whole. When the interest rate goes up, the amount that you have to pay also rises, and it falls when interest rates come down.

Fixed rate
The rate is fixed for a specified number of years, so you know what your payments will be over that period. Following this period, the rate will usually revert to the lender's standard variable rate. Speicial fixed rate schemes are often available for the first time buyers.

Capped rate
This has similar advantages to a fixed rate as the interest rate will not rise above the cap. These schemes may sometimes include a collar or minimum rate level which is the level the rate will not fall below.

Discounted rate
A discounted rate gives you a reduction of, for example, 2% off the variable rate for a specified period. So although the rate may rise and fall, you will be paying less than the standard variable rate.

Flexible mortgage
A more recent innovation, these give various benefits which usually include the ability to vary monthly payments in line with your changing circumstances. They may also allow you to take 'payment holidays' and to borrow back any overpayment you have made. Because of their flexible nature and the variety of chemes available it is not possible to give a full description here, but your independent financial adviser will provide more ditail if you are interested in this type of loan.

Cash back
Some loans offer a lump sum which is paid out following completion, with a mortgage charged at the lender's variable base rate. Smaller cash backs may be offered with reduced rates and other incentives as a combination package. It's important to remember that, although the interest rates on some special schemes may look low, other factors such as arrangement fees and early redemption fees could mean you end up paying more in the long run.

APR
All lenders have to quote an Annual Percentage Rate (APR) in addition to their standard interest rate. This is to help you compare different schemes. The APR can be confusing but, as the calculation of APR takes into account other costs such as the arrangement fee and indemnity premium, it gives a more accurate indication of which mortgage is likely to be most expensive. However, beware of relying too heavily on the APR as a true method of comparison. Although the principle is the same, different lenders use varying assumptions for their calculations.