Charlton Foxcroft & Co Ltd Types of Mortgage
Repayment Mortgage
A repayment mortgage the debt will reduce with each monthly payment you make, albeit the reduction will be gradual in the early years. As the debt reduces the amount of capital repaid increases, thus increasing the equity in your property. The mortgage is guaranteed to be repaid at the end of the term provided that the payments are met in full as they fall due and providing that the mortgage is not amended for example by raising additional funds or extending the term.
Interest Only Mortgage
With an interest only mortgage, your payment to the lender consists of interest only with no element of ongoing repayment of capital. In order to repay the loan at the end of the mortgage term you may wish to consider some form of repayment vehicle in place and you should seek financial advice to determine which repayment vehicle may be suitable. It is your responsibility to ensure that your monthly payments are kept up to date on any investment vehicle in place to repay the mortgage and should you cease to pay the premiums there may be insufficient money to repay the loan.You are responsible for repaying the mortgage at the end of the term and the property could be repossessed by the lender if you are unable to repay the mortgage in full by the end of the term.
Split Repayment & Interest Only
A split interest only and repayment mortgage means that part of the mortgage is repayment and part is interest only.
Charlton Foxcroft & Co Ltd Mortgage Features
Fixed Rates
This is where your prime concern is to have the comfort of knowing that your monthly mortgage repayments would remain the same for a period of time. The term fixed interest rate means that the interest rate is to remain unchanged for a specific period. Upon expiry of the fixed interest rate period, the interest rate applicable to your mortgage will usually change to the variable rate prevailing at the time.- If underlying interest rates rise the payments will not increase during the fixed rate period
- If underlying interest rates fall the customer will not benefit from a lower payment during the fixed rate period
- An Early Repayment Charge may apply if the mortgage is paid off during the fixed rate period or beyond in some cases
Discount Rates
A discounted mortgage usually describes a product which has a specified discount from the lender's standard variable rate for a set period and at the end of this period the discount no longer applies so the borrower pays the lender's standard variable rate. This usually means the payments increase after the discount period.
Flexible Mortgage
With a flexible mortgage, you may have the ability to make overpayments on your mortgage account either on a monthly basis or by making capital lump sum payments. You may also have the benefit of being able to drawdown monies at any time without charge or penalty. You may also be able to take payment holidays and make underpayments. You may have the benefit of your interest being calculated on a daily basis. Flexible mortgages may have some or all of the features described above however terms and conditions will vary from lender to lender.
Tracker Mortgage
The term tracker rate means that it has an interest rate which is charged at an agreed margin above or below a specific index. This is usually the Bank base rate but could also be used to describe mortgages which follow other indices. Should the Bank of England base rate change, because your rate is variable, your monthly payments will rise or fall accordingly. Once the tracker rate is at an end your payments could revert to the variable base rate prevailing at the time which could be a higher interest rate than you have been paying which means that your monthly payments would increase. An Early Repayment Charge may apply if the mortgage is paid off during the tracker rate period or beyond in some cases.
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