Morgage types

There are a whole number of morgages available, which is most suitable to you will depend on your personal circumstances. If you are unsure which type of morgage is ideal for you, please discuss it with your broker.

Interest only - ISA, Pension or Endowment morgage - This is where you simply repay the interest owed on the morgage, and take out a policy such as an endowment to cover the repayment of the loan at its end.

Repayment only - Capital and Interest morgage - With this style of morgage, you pay back interest and a portion of capital each month, at the end of the agreed term, the morgage is paid off.

Within the above main catagories there are a number of options:

1.FIXED

2.CAPPED

3.DISCOUNT

4.VARIABLE

5.CASH BACK DEALS

6.Flexible

Fixed Rate Morgage

Fixed Rate is where there is a set interest rate for a fixed period. At the end of the term the normal variable rate is paid. A fee for admin or arrangement is often paid upon confirming this type of morgage.There is often a penalty incurred should you choose to pay the morgage off before the end of its agreed term, this is seen by many as unfair and too inflexable, however this option and simple and easy to manage, and still remains popular.

Capped Rate Morgage

This simple gives you an element of protection against huge interest rate rises, by capping the amount the interest can increase. So if your on a tight budget and would prefer to pay just a little more for long term stability and peace of mind, this is the one for you.

Discounted Rate Morgage

Often popular with first time buyers, it offers a good low interest period at the start of the morgage, often 1-5 years in duration, this is great for those on a tight budget as it fixes your costs for the duration of the offer period. It should be noted however, large penalties are often incurred for consumers looking to move or change their morgage during the initial offer period. Make sure you are 100% sure of the conditions before you agree to take on this type of morgage. At the end of the offer period the morgage would normally revert to a standard variable rate.

Variable Rate Morgage

Variable Rate is the typical option chosen, where the interest that you pay depends on the general economy and bank of England interest rate. The interest rates are constantly changing, both up and down, and therefore can make it difficult to predict what your payments will be annually.In many other countries this option is considered far too risky, due to the uncertainty of the interest rates.

Cash Back

Cash back deals. Some standard variable rate morgages offer a cash sum when the morgage is taken out, which can be used in any way. This is not an interest rate option, but this sum can be invested and can be profitable.With cash back deals there is an early redemption penalty period, usually of five years, in which should you pay part or the entire morgage, you must also pay the cash back received. It may be beneficial to combine different interest rate options and some lenders allow you to do this.

Flexible morgage

This is very much the new kid on the block, offering fantastic flexibility and the chance to save yourself interest by off setting money against your morgage and making overpayments at will. Many of these types of morgages offer a whole range of features, although some attract a fairly large arrangement fee, they can save thousands in interest, with just a relatively small overpayment!

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