If you are new to the world of residential mortgages, take time and scrutinize the options before you know what exactly you need. This should be an important time in your life when you make major decisions for your lifetime. Since this is a major investment, you should not allow any mistakes. We will explore all you need to do to get it all done satisfactorily. There are many types of borrowers to consider before getting information about how lenders operate. Here is are the types of repayment.
Types of Repayment
- Interest Only
This method means the lender requires monthly payments based on the interest. This simply means the amounts will not be reduced during the term. To change to the ‘end of the term’ plan, you need to explain to your lender how you will be doing it. For example, some of the acceptable options are; the scale of the property, endowments, and savings, as well as pension lump sums. The interest-only mortgages are not easy to obtain compared to repayment mortgages as well as the eligibility, which becomes complex.
- Capital and Interest
In this plan, you will be paying both interest and capital at the same time each time. This means the total amount of loan reduces every month, with each payment. This payment can go to up to 35 years, which is subject to mortgage lending, but mostly before you hit 70 years. This is the preferred route for most of the borrowers.
Types of residential mortgages to explore
- Fixed Rate Mortgage
This method demands that you pay a specific amount in a defined period of time. Most of the lenders offer rates, based on between 2 and 5 years. Others allow 10 year periods. The interest rate mostly remains the same across the spectrum over this specified period. After completing the fixed rates, you will be advancing to the lenders Standard Variable rate. Most borrowers hope to secure a new agreement and load with the same lender after completing the initial payment.
- Discounted Rate Mortgage
When the lender provides a discount from a standard variable rate, you will have a discounted rate mortgage. Like trackers, this type of mortgage depends on the movement. It is also based on a 2, 3, or 50-year basis. This is the main issue related to the mortgage.
- Offset or current account mortgage
The offset mortgage utilizes the money in the savings to help you prepare and secure the mortgage payments. Also called the current account mortgage, it helps you clear the payments using the money in the savings. This means that the more you have in your savings the more you reduce your mortgage.
- Tracker Mortgage
This is a mortgage, which tracks a different interest rate such as the base rate. These rates are subject be changed and do this often move consistently. You may choose to take one, which tracks between 2 and 5 years and move onto the lenders' standard variable rate.
- Cashback Mortgage
This mortgage gives you a lump sum cash at the time you begin the mortgage. This initial incentive applies to specific types of mortgages and can be fixed or a varying portion of the entire mortgage. They are not always available but can be great for borrowers who need the lump sum to install a portion of their houses such as kitchen or bathroom. The only downside associated with it is that it comes with a high-interest rate hence less popular.
Remortgaging is available for homeowners looking for renewing huge loans. They are often the same products but may include other types as well. This means fixed rates, and tracker mortgages can be included as well. The important thing is to ensure you know the appropriate time to take this option. It may take up to 8 weeks to complete the initial rate.
Even with savvy borrowers re-checking to verify its worth, it may be too much to remember.
This is a popular process for borrowers especially when a new one is taken before moving. The main reasons include:
- Releasing equity from a property
- Consolidating debts
- Moving to a better rate
- Saving money