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Mortgages*
Purchasing of property is for the majority of people, the largest financial transaction of their lives. Since many cannot afford to purchase property outright, they need the help of a financial institution to loan them the extra money to facilitate this move. This is called taking out a mortgage, a loan repayable over a specified period of time.
The amount of loan that is granted, depends on a number of generic factors, even though specific conditions differ between lenders:
A multiple of the client(s) income, which may include income and benefits, but will have to be proved,
Current liabilities such as credit cards, loans and overdrafts,
The client(s) credit history,
Employment status.
There are two types of mortgage, capital and interest and interest only:
Repayment mortgages ensure that the loan is repaid at the end of the specified term. This is achieved by paying both capital and interest over time,
Interest only pays only the interest on the mortgage to the lender. At the end of the chosen term, the original capital has to be repaid. This has to be provided by a suitable investment vehicle.
Most lenders offer a range of options for the payment of interest on the mortgage, which include:
Variable rate - payments fluctuate without limit, as interest rates change,
Fixed rate - borrower has fixed payments for a specified period of time. After this time, the rate changes to the lender's variable rate,
Discount rate- a discount off the normal variable rate for a specified period,
Cap and collar - the rate has both fixed upper (cap) and lower (collar) limits.
Invariably whichever rate chosen, there may be redemption penalties involved. These are interest penalties imposed within a specific time period to prevent person leaving the chosen lender. After the penalty time period has elapsed, the client(s) can move to another lender if so desired, without penalty.
The type of mortgage selected will depend on various factors specific to the client(s). Many clients these days require flexible mortgages. These allow facilities such as; overpayments, payment holidays, daily calculation of interest and portability.
*this product is not regulated by the Financial Services Authority. Loans subject to age, status and quotation. Insurance may be required. Written quotations available on request. YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.
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