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Making Sense of Mortgages
Deciding which mortgage is right for you can seem daunting. At Duncan Insurance & Mortgage Services Ltd we review your circumstances to provide you with a choice of products tailored to suit your needs.
We guide you through the maze of different mortgages and insurances available, and give you all the information you need to make the very best choice for you and your family.
Click on the menu tabs in this section to get a better idea of which of our services will suit you best, and for more detailed advice of the right package for your needs, call direct on 01273 615063
First Time Buyers
A wide range of mortgages are available for first time buyers. Our ‘Plain English’ guide below will help you understand how each of the different products works.
Standard variable mortgage
- A standard variable mortgage is based on the lender’s basic mortgage rate, commonly known as the Standard Variable Mortgage Rate.
- It is usually the rate that customers revert to after a fixed, capped or discount period ends.
- This mortgage is regarded by some as the least complex mortgage type with the interest rate varying (rising and falling) in response to changes in the UK base rate. The base rate is set by the Bank of England and lenders are free to decide for themselves the amount that they will alter their own interest rates by in relation to these movements in base rate
Capped rate mortgage
- A capped rate mortgage puts a maximum limit on the interest rate that you have to pay. You therefore gain the security of having a ‘ceiling’ or upper limit to the amount that the lender can increase the interest payable on your mortgage.
- This period of capped interest is for a specified period only; typically between one and five years. At the end of the specified period your mortgage will usually revert to a variable rate.
- However, it is possible to find a capped rate mortgage that can last for the entire life of the loan. Although this arrangement initially sounds attractive, some capped rate mortgages also have a ‘collar’ or lower limit below which the interest on your loan cannot fall.
- There are many varying degrees of flexibility. In order to be truly flexible, a mortgage must allow borrowers to do the following:
Take Payment Holidays
Borrow back overpayments
Carry no redemption penalties
Calculate interest daily
- Some so-called flexible mortgages may only meet a couple of these criteria, while other all-singing, all-dancing mortgages allow you to do much more. So make sure you do your research before you choose the flexible mortgage deal that suits you best.
Fixed rate mortgages
- A fixed rate mortgage provides guaranteed monthly payments for a predetermined period of time.
- If you’re the kind of person who likes certainty and the reassurance of knowing exactly what your monthly outgoings will be, then a fixed rate mortgage may be most suitable for you.
- A fixed rate mortgage sets the interest rate that you will pay for a specified period, guaranteeing the amount payable each month for a fixed length of time.
- Once the fixed time period expires your mortgage repayments switch to the mortgage lender’s standard variable rate. This arrangement will enable you to more accurately forecast your budget during the initial years of your mortgage term.
- In addition, if the interest rate rises above the fixed rate that you are paying, you will actually save money. However, the reverse of this is also true. If the interest rate goes down whilst the fixed rate deal is in place, you will end up paying more.
Discount rate mortgage
- A discount rate mortgage offers a percentage discount from the lender’s normal variable rate for a set period of time.
- When the standard variable rate fluctuates, the discount will remain fixed, however, the amount of discount and the period will vary from deal to deal.
- Discount mortgages are more suitable for people who prioritize low initial payments at the expense of higher rates later on; for example first time buyers, whose income isn’t so high who want to have some spare cash to spend on furnishing their new home.
- The discount rates last from six months to about five years and generally the shorter the period of discount, the higher the discounted rate will be.
- In addition, you should consider that sometimes lenders can attach redemption penalties for remortgaging after your discounted period has ended.
- With a base rate tracker mortgage the rate of interest you pay is tied to the base rate set by the Bank of England.
- Typically the tracker mortgage rate will be set as a percentage above the base rate and although the resulting interest rate is usually lower than a mortgage lender’s standard variable rate, this will vary from lender to lender. A main advantage of a tracker mortgage is that the difference between the variable rate and the base rate is usually a lot smaller than the margin between an standard variable rate mortgage and the bank base rate so you will end up paying less overall.
- In addition, if the base rate falls, the interest payments on your mortgage loan will fall accordingly, no matter how low the base rate goes. However, remember that the bank base rate can rise as well as fall which can make budget planning difficult.
If you have credit rating problems, you will need to apply for an adverse credit mortgage. Even if you have defaults, mortgage arrears, county court judgements, have entered into a voluntary arrangement or are a discharged bankrupt, we may well be able to help.
Most lenders will not accept mortgage applications from individuals who have, or have had, any of these problems, and those that do would be more expensive than their standard mortgages. Our access to all the mortgages available in the market means we are able find lenders that will consider your application, and the most competitive deals for your circumstances.
(You may have to pay an early repayment charge to your existing lender if you re-mortgage)
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Copyright © 2018 Duncan Insurance & Mortgage Services. All Rights Reserved. www.duncan-mortgages.co.uk. Duncan Insurance & Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority. FCA registered number 306182. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.