Lisé Gothard, Regal Park Financial Limited
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Regal Park Financial Limited
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Our expert advisers will explain the differences between the various options available and guide you through the selection process - making everything as easy as possible for you.
While the range of mortgage options can be very confusing, the basic principle of them all is quite simple – you borrow the amount of money you need to buy a property, and then repay the loan over a number of years. The money you borrow is called the ‘capital’ and the length of time you take to pay it back is called the ‘term’. The other element of any mortgage is the ‘interest’, which is the additional amount you pay your lender for being able to borrow the money.
The two main types of mortgage are repayment and interest-only. The difference between them is whether your monthly payments include paying off the capital element, or whether you just pay the interest on the loan each month and repay the capital at the end of the mortgage period.
The other important decision you need to make is whether you choose to pay a fixed rate or variable rate of interest on your loan. There are pros and cons of both options, and it will depend on your financial circumstances which one works best for you.
There are many different combinations of mortgages based on these main principles, though each one has their own variations and rules.
Tracker mortgages, discount rate mortgages and capped rate mortgages are all repayment mortgages with variable rates, but have different ways of calculating the rate they use, and offer other incentives.
Other types of mortgages include cashback mortgages, where you get some cash back as an incentive, offset mortgages, which combine savings and mortgage together, and 95% mortgages if you can only afford a 5% deposit.
A flexible mortgage gives you options to vary your payments, so you can make overpayments if you can afford to, and potentially take a payment break if needed.
Buy to let mortgages are for people who are buying a house to rent out rather than live in themselves. Some buy to let mortgages are not regulated by the Financial Conduct Authority.
First time buyers can apply for any of these mortgages, and any current schemes the Government has to offer.
And if you are moving home we can help you move or 'port' your mortgage to your new property.
We'll match you to the right mortgage, so you can relax and enjoy your new home.
New Build Mortgages
Regal Park Financial is experienced in helping buyers purchase new build homes.
We’re experts at handling the various stages of buying a new build home, and understand the questions both you and your lender will have when buying off plan. We work closely with all the Government schemes to help you buy a new build property in a way you can afford, and help to ensure that mortgages are offered within the 28 day deadline that meets the criteria of the builder.
We want your mortgage process to be as quick, easy and efficient as possible so you have the time to plan the interior of your new home. We’ll help you to enjoy the experience every step of the way.
First Time Buyers
Buying your first home is an exciting time, but it can also feel quite overwhelming with so many decisions to make. You hope to find and buy your dream home but may not be sure what you can afford, and finding the right mortgage is very important.
At Regal Park Financial we offer the support and professional guidance that first time buyers need, and our team of experienced advisers are dedicated to helping you purchase your first property and make the process as easy as possible - from your initial application right through to completion and beyond.
We can advise you of the mortgages available and how to budget for your mortgage. Our access to over 50 lenders in the market place including all the high street lenders and their affordability calculators means we can advise you how much they will allow you to borrow and how much this would then cost you per month.
This is the simplest type of mortgage and is also the most popular and easily available.
You borrow the capital you need to buy your house, and then make payments each month to repay both the capital and the interest on the loan for an agreed time (the term) until you’ve paid back the full amount.
Your monthly repayments depend on the amount you've borrowed, how long you've borrowed it for, your interest rate and how the interest rate is set. As long as you keep up the repayments your mortgage loan will be paid off by the end of the term and then you’ll own your home outright.
Interest Only Mortgage
With an interest-only mortgage (sometimes known as an endowment or pension mortgage) you only pay the interest on the capital (the amount you borrowed) each month, and then pay back the capital at the end of the loan period (the term). This could be from an endowment, pension, ISA, or savings.
If you don’t have the money you might have to sell your house to pay off your mortgage, or find alternative funds.
Lenders can insist you show them evidence of how you plan to repay your loan at the end of your loan period before they will allow you to have an interest-only mortgage.
Fixed Rate Mortgage
Fixed rate mortgages are popular because your mortgage rate is ‘fixed’ for a set number of years so you know exactly how much you have to budget for each month. The set period can vary but is usually two, three or five years, though it can sometimes be as much as ten years.
The rate is fixed for the period agreed no matter what happens to interest rates generally or interest rates on other mortgages.
If you want to change your fixed rate mortgage before the end of your fixed rate term there will usually be an early repayment charge for switching to another rate. Please speak to one of our advisors for advice in this case.
When your fixed rate period finishes you'll be put on your lender's Standard Variable Rate (SVR). This may have a higher interest rate than you've been paying, but you can apply for another fixed rate deal.
If you choose a Standard Variable Rate (SVR) mortgage the interest rate you pay will go up and down, generally in line with the Bank of England base rate, so your monthly repayments would go up and down too.
Each lender has its own SVR which may be higher than the Bank of England’s base rate, and they may also increase or decrease their rate at any time – not only after base rate changes. The interest rate you pay could change even without the base rate moving, or the base rate might come down but your mortgage rate could stay the same.
Tracker mortgages are basically a type of variable rate mortgage. They get their name because they follow - track - movements of another rate, usually the Bank of England base rate.
The lender’s mortgage rate is generally set at a percentage above the base rate for a period of time, or for the lifetime of the mortgage. For example, if the Bank of England base rate is 1 per cent and your add-on rate is 1.5 per cent above that, your mortgage rate will be 2.5 per cent.
Introductory tracker rates can be some of the lowest mortgage interest rates available. They are generally for two to five years, although some lenders offer trackers which last for the life of your mortgage or until you switch to another deal.
Although your payments will be lower when rates are low, they will increase if the rate goes up. Some lenders set a minimum rate, but not a limit on how high the rate can go. And as with all variable rate mortgages, you won’t have the security of knowing how much your payments will be each month.
Discount Rate Mortgage
If you receive a discount rate mortgage, your discount is a reduction on your lender's standard variable rate (SVR).
Mortgages with discounted rates start off cheaper but, as they are linked to the SVR, your rate will go up and down when the SVR changes. As with all variable rate mortgages, you won’t have the security knowing how much your payments will be each month.
These deals only last for a fixed period of time, usually between two and five years. Both SVRs and discounts vary across lenders so you will need to check both figures to see which are the best value.
Capped Rate Mortgage
A capped rate mortgage is a variable rate mortgage but has a limit, or 'cap', on how high the interest rate you pay can rise.
You'll benefit from knowing that the money you repay will never exceed a certain level, but you also benefit when interest rates go down.
However, the cap tends to be set quite high and the rate is usually higher than other variable and fixed rates. Your lender can change the rate at any time, although no higher than the cap level.
Lenders sometimes offer cashback mortgages as an incentive to take out a mortgage with them. The way they work is that the lender gives a percentage of the money back, with the amount depending on the size of the loan.
It may be tempting to have a lump sum to help with setting up your new home, but it is not ‘free’ money - it is paid for out of the mortgage interest you pay to your lender.
You'll need to look carefully at the terms and conditions, the interest rate you'll be charged, and any additional fees, to make sure it's right for you. And you'll probably be able to find cheaper mortgages without cashback.
Offset mortgages are linked to your savings account. This means that your savings are used to reduce your mortgage as you only pay interest on the mortgage amount, minus the amount you have saved.
Every month, the lender looks at how much you owe on your mortgage and then deducts the amount you have in savings. You pay mortgage interest just on the difference between the two.
For example, if you have a mortgage of £150,000 and savings of £25,000, your mortgage interest is calculated on £125,000 for that month.
This type of mortgage might be a good option if you have savings and a reasonable bank balance every month, although it may be more expensive than other deals. You won’t earn any interest on savings used to reduce your mortgage interest, but you won't pay tax either, which is useful if you're a higher rate taxpayer.
This cuts the amount of interest you pay but your mortgage rate is likely to be more expensive than other deals.
Offset mortgages can be on fixed or variable rates.
A 95% mortgage is a loan for 95% of the value of the property, and is for people who can only afford a 5% per cent deposit.
For example, if you wanted to buy a house worth £200,000, you would need to borrow £190,000 and put in a £10,000 deposit of your own money.
With such a small deposit you are at greater risk of falling into negative equity. This means that if house prices go down, even by only 6%, your house is worth less than your mortgage. Lenders will charge a comparatively high mortgage rate to cover this risk.
Flexible mortgages are like other mortgages, but have extra features added which give you more flexibility with making your monthly repayments. Most mortgages allow you to pay more than your regular amount when you can afford it, but do not have an option to repay less than the agreed amount each month.
A relatively new type of mortgage, flexible mortgages allow you to overpay when you can afford to, perhaps if you have a pay rise, bonus or an inheritance. Provided you have made some overpayments you can then underpay or borrow back your overpayments if your financial circumstances change. The length of time you are allowed to take a break can vary between lenders.
Overpaying can reduce the amount you owe and save money on interest payments, but if you underpay you'll still be charged interest each month which could increase your repayments after a break.
Flexible mortgages are usually more expensive so there may not be much advantage unless you have capital or savings deposits that can be offset against your loan.
Buy To Let Mortgage
Buy to let mortgages are for people who want to buy a property to rent out rather than live in it themselves.
The amount you can borrow is partly based on the amount of rent you expect to receive, but the maximum amount is 85% of the property value. You must be under 75 years old to qualify for a buy to let mortgage.
Our mortgage advisers are happy to answer any questions you have about buy to let mortgages to ensure you get the right deal.
We have access to over 50 lenders in the market place including all the high street lenders and we'll help you find the one that suits you best. We have years of experience so are aware of the advantages and disadvantages of the buy to let market.
We'll also ensure that the usually high costs of such an exercise are kept as low as possible.
Our advice covers all aspects of buy to let mortgages, including multiple occupancy and student lets, block of flats and multi-unit freehold blocks and limited company buy to lets. We also give advice on let to buy mortgage products.
Some buy to let mortgages are not regulated by the Financial Conduct Authority.
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Our expert and professional financial advisors are waiting to help.Request more information or a callback now or phone us on 01733 560 650