We asked our highly trained team of mortgage advisers for some of their favourite or frequently asked questions on mortgages, and collated them all together into a handy series of articles for you to read!
What is a mortgage?
A mortgage is a legal agreement by which a bank, building society or other official mortgage lending body lends money at interest, in exchange for taking title of the homeowner’s property, with the condition that the conveyance of title reverts to the homeowner upon the repayment of the total debt.
How does paying off my mortgage work?
The amount you borrow with your mortgage is known as the balance. If you have a ‘Capital Repayment’ mortgage, each month, part of your monthly payment will go toward paying off that mortgage balance, and part will go toward interest on the loan. If you have an ‘Interest Only’ mortgage, then your monthly payment just pays the interest and the full balance is due at the end of the term. Interest is what the lender charges you for lending you money.
What is the average mortgage length?
Mortgages can vary in length from 5 to 40 years, dependent upon your requirements and repayment abilities. The average mortgage length in the UK is 25 years, however if you can take out a shorter repayment length you will probably save money on interest payments overall.
What are the different types of Mortgage loans?
Fixed rate mortgages are what most people are offered when they first take out a mortgage with a lender. Lengths typically vary from two to five years, and the rates are usually a favourable ‘special offer’ to tempt borrowers to choose that particular lender.
Tracker mortgages track the base interest rate, set by the Bank of England, and can go up or down in terms of monthly repayment amounts in line with the interest rate.
Discount mortgages are a discount off the lenders standard variable rate (SVR) mortgage, usually for a fixed term of between two to five years, and offered as a favourable loan to tempt homeowners to use that particular mortgage provider.
A variable mortgage can change its interest % rate (repayment amount) at any time. Most lenders have a standard variable rate mortgage (SVR) that homebuyers revert to when their more favourable deals (such as a fixed or discounted mortgage) end.
Capped rate mortgages means that your repayments will be in line with the lenders SVR mortgage, but there is a cap of a fixed % amount that the repayment rate cannot rise above, so you’re protected against large interest rate rises.
Offset mortgages work by linking your savings and/or current account to your mortgage so that you only pay interest on the difference. You still repay your mortgage every month as usual, but your savings act as an overpayment which helps to clear your mortgage early.
Before deciding which mortgage type is best for you, it’s important to take expert advice from a firm that can give you advice relating to a range of mortgage lenders and products, as opposed to an adviser that may be ‘tied’ to one or just a few. Our team of mortgage advisers will take all of your circumstances into account and search a wide range of providers, for the best offers for you to consider, so you can be sure you’re not missing out on any great deals by using us.
Is it wise for me to pay off my existing mortgage?
That depends entirely on your financial circumstances and what money you have spare to invest. Before making a big decision like completely paying off your mortgage, it’s probably a good idea to speak to an accredited financial advisor so that you get some impartial advice before you begin.
What is the difference between refinancing and a second mortgage?
A second mortgage is simply when you borrow more money on the equity in your home as a second loan rather than refinancing. It can also be known as a ‘second charge’ or a ‘secured loan’. A second mortgage takes a backseat to your first mortgage, meaning the lender who gave you your original mortgage on the home has precedence over the new lender of the second mortgage.
Before you consider taking out a second mortgage, or remortgaging on your current deal, you should speak to us so we can properly advise you of all of your options. It’s important to make sure that you get the right advice on decisions like this, so talking to the experts before you begin is vital.
Can I sell my house while I am still paying my mortgage?
Absolutely, people move homes all the time while they’re still paying off their mortgage. Talk to us as soon as you know you want to move, and we’ll make sure everything is taken care of for you.
Whether you’re looking for a bigger property and more room for your growing family, or downsizing for retirement, your mortgage can move homes with you and our team of experts can make sure it’s as hassle free as possible.
How do you sell a house with a mortgage?
Selling your property while in mortgage is a fairly common thing. Having a mortgage simply means you still owe money to your lender, and have not yet repaid your home loan. Typical mortgages run for between 15 to 25 years, and homeowners regularly sell their homes to move before loans are paid.
The process of buying a new house while selling the old house is still pretty simple, even if you have many years left to run on your mortgage. Talk to us at an early stage, and we’ll help to find you the best possible mortgage deal for your new property.
What is a cashback mortgage?
A cash back mortgage is one in which a borrower receives money back upon completion of the new mortgage. You can potentially get anywhere between 1-7 per cent, depending on your lender, however most mortgage products generally offer a fixed amount per product.
A cashback mortgage can be a good idea for those who need the money right away and don’t mind paying the slightly higher interest rate over the term of the mortgage.
As always, before you decide on a particular type of mortgage you should make sure you’ve spoken to an expert adviser so you can be certain that you’re making the right decision for your long term financial future.
READ MORE: Mortgage FAQ Part 2