Professional Mortgage Advice

A mortgage is a means by which a "borrower" receives a loan from a "lender", normally a building society or bank, in order to purchase a property. The loan is repaid over a set number of years (often 25 years but this might vary) in monthly installments. The purchased property acts as security for the loan. If the purchaser fails to make their repayments, then the lender would be entitled to repossess the property.

The rate of interest is an amount of money, included in your monthly mortgage repayments, givingBroker the lender a financial return on their loan.

Over the course of your mortgage, the interest rate you will pay on your loan will vary. This means your monthly repayments will also vary. It is important to allow for this when calculating the amount you can afford to borrow. Amongst other factors, the rate of interest is affected by the performance of the British economy and therefore difficult to predict. For this reason, lenders have introduced a number of different schemes, some of which offer some guarantees to the amount of interest you will pay. These are outlined below.

A flexible mortgage allows you to make additional or lump sum payments in excess of your scheduled amount, enabling you to pay off your mortgage early. By reducing the capital amount of your mortgage in this way, you are also reducing your monthly interest payments. You may take this money back at any stage or use it to take a repayment "holiday".

The interest rate on your mortgage will vary, unrestricted, up and down over the period of your loan. The lender will guarantee you a set rate of interest on your loan, normally for a specified number of years. Once this period has expired, your interest rate will revert to the normal variable interest rate. The lender will guarantee that your rate of interest will not rise above a set interest rate. However, if the normal interest rates fall, the rate of interest, the lender charges you, may also fall. 

The lender can guarantee a discounted amount of anything, but normally up to five per cent, off your interest rate. This means the interest you pay will still vary up or down but at a lower rate than the general interest rate. Normally, this is for a set number of years. Once this period has expired, your mortgage will revert to the normal variable interest rate.