Mortgage Glossary

Arranging a mortgage is the biggest financial transaction most people will ever make. It should be an exciting experience but unfortunately, at times it can also be worrying. We will scan the market for the best deal to suit your unique circumstances, we have access to a panel of lenders representative of the whole of market so we will find the best deal for you.

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Fixed Rate Mortgages

A fixed rate mortgage provides guaranteed monthly payments for a fixed period of time.

The mortgage sets the interest rate that you will pay for a specified period, guaranteeing the amount payable each month for a fixed length of time.

Once the fixed time period expires your mortgage repayments switches to the mortgage lender's standard variable rate. This arrangement will enable you to more accurately forecast your budget during the initial years of your mortgage term.

In addition, if the interest rate rises above the fixed rate that you are paying, you will actually save money. However, If the interest rate goes down whilst the fixed rate deal is in place, you will end up paying more.

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Interest Only Mortgages

With an interest-only mortgage you only pay-off the interest on the loan and none of the outstanding balance until the end of the term.

Interest-only mortgages usually have lower monthly payments, than a repayment mortgage. At the end of the term of an Interest only mortgage you have to pay back the whole outstanding balance of the loan.

Normally when a person takes out a Interest only mortgage they will also have taken out some kind of investment plan, which would be used to pay back the mortgage. The most common terminology associated to this is called a "Repayment vehicle". These can be in many different forms such as:

• ISAs (Individual Savings Account)
• Personal Pension Plan

Whatever Repayment Vehicle you decide to pick, it has to be reviewed on a yearly basis, to make sure that it is on track to pay of your mortgage and that there are no shortfalls.

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Repayment Mortgage

A repayment mortgage guarantees that your loan is paid off in full at the end of the agreed term. With a repayment mortgage you make monthly payments that cover both the interest on the loan and the repayment of the loan itself.

This brings peace of mind to the borrower, of knowing that you are reducing your mortgage every month.

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Base Rate Tracker Mortgage

This particular kind of mortgage is a variable rate mortgage which tracks the Bank of England Base Rate, (BOEBR) Each lender has its own deal that it will offer to customers. There are to many variations to list, but as an example the lender could charge you -0.25% under the BOEBR for the first year and then +1% over the BOEBR for the remaining years.

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Buy To Let Mortgage

This type of mortgage is for people who are considering to buy a property and to then rent it out. What with the growing house prices, buying an investment property is becoming more common, it could also of course be a good source of income.

The Financial Services Authority does not regulate some aspects of buy to let arrangements.

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Cashback Mortgage

As the name suggests, you get cash - in addition to the money you're going to be borrowing for the property. You may use it to pay for moving costs and furniture.

Cashback offers are normaly best seen as a sales technique to get you to take out a mortgage with a particular lender.

You may be required to pay back the cash back amount if you repay the loan in the initial periods.

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Flexible Mortgages

The Flexible Mortgage is a fairly new introduction into the U.K It has virtually no fixed parameters because the lender can make the mortgage into anything they want it to be.

The basic rules of this type of Mortgage are:

1. Interest is to calculated on a daily basis
2. The borrower to be able to make overpayments at no extra charge, and to be allowed to underpay depending on the borrowers circumstances.
3. To allow the borrower payment holidays, again depending on the borrowers circumstances

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The Sharia Mortgage

Most types of U.K Mortgages are interest based, Which mean they conflict with the Sharia Law. This making the Mortgage unexpectable to Muslims as paying interest is against their religious principles.

Sharia compliant Mortgages help Muslims to purchase property as it does not compromise the Muslims religious principles.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.