The uk morgage market is fiercly competative amongst lenders, and this is excellent news for
consumers, its caused the expansion of product range of uk morgages being marketed today. There
are 2 main types of uk morgage with 6 varibables on the main themes.
Interest only - ISA, Pension or Endowment Mortgage - 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 Mortgage - 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 mortgages offer a cash sum when the mortgage 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 mortgage, 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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