TYPES OF MORTGAGES

Repayment Loan (sometimes known as Capital & Interest Loan)

With this type of loan, your repayments are made up of 2 elements, interest charged on the loan, and a capital repayment. This ensures that as time passes, your loan balance will reduce, to the point that the balance will eventually be nil.

A big advantage of this type of loan is that (subject to payments being maintained) it guarantees to repay the loan at the end of the term. The reducing balance also means that the equity in the property increases.

Interest Only Loan

With this type of loan, your payments consist entirely of interest, and your balance will not change. While this is a cheaper option, it is vital to realise that there is nothing in place to reduce the balance.

You should have a suitable plan in place to ensure you will be able to repay your debt once the loan has reached its end date, typically Endowments, ISAs, PEPs or Pensions. These are all reliant on investment performance over the term, and provide no guarantee that your loan will be sufficiently covered.

Flexible Loans (Offset Loans/Current Account Mortgages)

These are based on an Interest Only structure, but, subject to conditions, allow overpayment and underpayments, giving the customer a significant amount of control over their mortgage balance.

Many now include the ability to link savings accounts or even current accounts. The benefit of this is that the interest is charged on the total debt balance, that is the mortgage amount minus the savings amount. This can have a significant affect on the amount of interest paid.

1) Instruct a Conveyancer.

2) Your chosen lender will assess your application, including credit searches. and instruct a property valuation.

3) Once the lender is satisfied with your application, they will send you a formal MORTGAGE OFFER. This will detail exactly what they will lend you, and on what terms.

4) Your Conveyancer will confirm with you that all other parties in the chain are ready, and you will EXCHANGE CONTRACTS. A completion (moving in) date is normally agreed at this point. (IMPORTANT; You should ensure buildings insurance and life cover is started from the date of exchange, as you are legally bound to purchase the property).

5) Your Conveyancer will deal with your existing mortgage lender, and if required, request any further deposit from you to be made payable to them. They will arrange for the funds to be drawn from your mortgage lender on, or shortly before, the COMPLETION date, and will clear your current mortgage.

6) Once this has been confirmed, you will be given the keys to your new home !!!

7) Your Lender will write to you confirming what payments are due, and when you should pay them.

REMEMBER – Footstep Mortgage are here to help you throughout this process, and are happy to offer guidance to all our clients at any stage.