Contemporary Property, Global Real Estate finance help guide, Building Mortgage Info
Mortgages and the Current Property Climate
Contemporary Residential Developments – Homes / Housing
23 March 2010
Property Climate
A mortgage is likely to be the single biggest financial commitment that anyone makes in their lifetime and, as such, it is better to be informed than wander into it without any information at all.
A mortgage is, in essence, a loan; however, it is a loan defined by two specifics. The first is that the money borrowed is designed to be paid back, with interest, over a fixed period of time. In general, this period is 25 years. The second is that the loan is ‘secured’. This means that the bank off-set their risk in lending you the money, by using your property as security and, if you are unable to make the repayments, they then have the legal right to sell your home to recover the money you borrowed.
There are many mortgages available and, although the banks offering them will have their own deals to offer you, they generally come into the following categories:
The Standard Variable Rate mortgage follows the Bank of England’s interest rate, but not at an exact level. This means that as the interest rate increases or decreases, the SVR follows suit.
Tracker mortgages follow the Bank of England’s interest rate absolutely. This means that if the interest rate rises, so does the mortgage, but you can reap the benefits of any fall in the interest rate, as the Tracker rate will fall with it.
Fixed mortgages set a specific rate of repayment, effectively protecting you against any rises in interest rates. However, if the interest rates fall, your repayments will not follow, but remain at the agreed rate.
A Discount mortgage will offer you a temporary discount from the lender’s Standard Variable Rate.
There are further variations on these themes: the Capped Mortgage that has an upper limit set against the Bank of England’s interest rate, Cashback mortgages, Current Account mortgages and Offset mortgages.
The important thing to do is your research. Different banks offer different incentives within these categories and it can be possible, with a little homework, to find the mortgage that suits your needs, whether you are a first-time buyer or someone who wants to re-mortgage. There can even be benefits from banking with your lender; NatWest, for example, offer Advantage Mortgages that has offers exclusive to its private banking customers. Alliance & Leicester operate a similar scheme tying in their Premier Current Accounts with their Premier Mortgages.
While each of the banks will have pages devoted to their 0 on their websites, it can seem a little daunting at first; there are ‘comparator sites’, such as Motley Fool, that will compare financial products for you, including types of mortgage. While these sites offer a quick guide as to what may be best for you, personal research and a ‘trawl’ through the banks’ websites can help you decide on the mortgage that is most pertinent to your situation. Many banks, such as Santander, offer a mortgage calculator service on their site to help you get a rough idea of what kind of mortgage you might be able to obtain.
Finding a mortgage need not be a difficult task. Indeed, with the current competition between banks to attract new customers, there has rarely been a better time to shop around as the list of offers, deals and incentives show little sign of abating.
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