Residential Mortgages

A mortgage is a loan taken out to buy property or land. Most run for 25 years but the term can be shorter or longer. The loan is ‘secured’ against the value of your home until it’s paid off. If you can’t keep up your repayments the lender can repossess (take back) your home and sell it so they get their money back.

The money you borrow is called the capital and the lender then charges you interest on it till it is repaid. The type of mortgage you are able to apply for will depend on whether you want to repay interest-only or interest and capital.

Invariably today, residential mortgages are only granted with full repayment (interest and capital), meaning you pay the interest and part of the capital off every month. At the end of the term, you should manage to have paid it all off and own your home. With interest-only on the other hand, you pay only the interest on the loan and nothing off the capital, meaning at the end of the term, the capital outstanding is owed to the lender.

You are responsible for ensuring a credible repayment strategy is in place so you have sufficient funds available to fully repay the loan at the end of the mortgage term. Failing to maintain an adequate repayment strategy could result in you having difficulty in fully repaying the mortgage capital when due.

There are different interest rates available from all lenders, to suit varying requirements and situations, and these combined within a mortgage is termed the product:

• Fixed interest rate/Stepped fixed – you pay a set amount each month for the duration of the fixed (or initial) period, thus allowing you the security of knowing your exact monthly commitments in the early years of the mortgage. You will be unaffected by changes in the underlying interest rates but if interest rates fall below the fixed rate, you will continue to pay the higher, fixed amount.
• Variable interest rate – the interest rate can rise and fall in line with market conditions and so does involve a degree of uncertainty as your monthly repayments can vary and increase, but will allow you to benefit from a fall in interest rates.
• Discounted variable interest rate – again, this involves a degree of uncertainty as your monthly repayments can vary and increase but it allows you to have a discount on your mortgage payments for a specific period. Also, to minimise monthly payments, it allows you to benefit from a fall in interest rates.
• Tracker mortgage – this utilises a tracker interest rate, meaning the interest rate is linked to either the Bank of England Base Rate or LIBOR and is equivalent to that rate plus a certain percentage. This means your monthly premium may vary and can increase and therefore involves a degree of uncertainty, but this does allow you to benefit from a fall in interest rates.
• Capped rate – a capped interest rate means the lender has put a “cap” (ceiling) on the maximum interest rate that can be charged. It provides the security of knowing your monthly repayments will not rise above a certain amount, whilst allowing you to benefit from any drop in the rate below the cap.

Your home may be repossessed if you do not keep up repayments on your mortgage.

There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £595.