Cosmic Remortgage

Types of Mortgages

There are two repayment type of mortgage:

• A repayment mortgage is where you repay capital and interest so at the end of the term you have paid off the loan.
• On an Interest only mortgage you only pay the interest so at the end of the term you still owe the loan balance.

Standard Variable Rate (rollover for graph)

Interest rates are set by the Bank of England, known as the base rate. The Standard variable rate is what the lenders charge in additional the base rate. The standard variable rate is set periodically by lenders although it doesn’t always follow the base rate. You can benefit from this type of mortgage if rate decreases but lose out if increases. As monthly payments may change it can be difficult to budget for.

Fixed rate (rollover for graph)

The Rate is fixed for a given period. The rate charged is usually just above the base rate at that time, after the period ends the rate usually reverts to the lenders SVR. You can benefit from this type of mortgage if rate increases but lose out if decreases. As monthly payments are fixed it is easier to budget for.

Discounted Rate (rollover for graph)

The rate is discounted for a given period. The rate charged is usually just below the lenders SVR at that time, but increases to the SVR after the initial discount period. You can benefit from this type of mortgage if rate decreases but lose out if increases. As monthly payments may change it may be difficult to budget for.

Tracker Mortgage (rollover for graph)

The rate changes in line with the base rate or LIBOR. LIBOR can be more volatile than the base rate. You can benefit from this type of mortgage if the rate decreases but lose out if increases. As monthly payments may change it can be difficult to budget for.

Capped Mortgage (rollover for graph)

A maximum charged rate is set for a fixed period. You can benefit if rate increases as the mortgage will not go above an agreed rate, and also benefit from rate decreases. The maximum rate is usually set just above the base rate and other fixed rate products at that time. It may be difficult to budget for but the maximum monthly payment is known.

Offset and Current account Mortgages

Savings interest and mortgage interest is offset. The mortgage is flexible and allows overpayments. A Drawdown facility is usually available where you can get additional borrowing up to a prior agreed limit. Some lenders allow loans and credit cards to be linked to the current account. This type of product works best if you have all your income paid into the linked account. It may also be possible to save tax with this arrangement as the mortgage interest is deducted from the interest earnt prior to any tax charge.

Other Types of mortgage

• Self Build
• Right to Buy
• Buy to Let
• Shared Ownership Schemes
• Sub Prime
• Islamic
• Commercial

Mortgage Fees

There are also a number of fees associated with a mortgage: Higher Lending Charges, Early repayment charges and booking fees to name a few. You should seek professional advice and make sure that you understand how much you are being charged before taking up a mortgage.