We deal with a lot of mortgage work at Onions & Davies, even in a depressed market where mortgaging and re-mortgaging is not as common as it used to be.
What is a mortgage?
A mortgage or legal charge is something which applies when you want to buy a house and do not have the cash to pay the full price. You will probably ask a bank or building society for a loan and in return for lending you the money, the lender will want to make sure that they have some protection if you do not repay it. This protection is a document that gives your house as security for the loan and it is this which is the mortgage.
Types of mortgage
Repayment – where your monthly payment is part of the interest and part repayment of the capital. To begin with, most of the repayments go towards paying the interest but later on, your payments will reduce the capital.
Interest only – where all your payments are to cover the interest but not the capital. In order to make sure that the capital is repaid at the end of the mortgage term or on your death, you will need to take out some form of life policy (sometimes called an endowment) or put in place an investment such as a pension or ISA.
Different lenders offer particular incentives to encourage you to borrow from them rather than an alternative lender. Some examples of these are:
Fixed rate mortgages – where the interest rate is fixed for a period of years. After that you pay their standard variable rate. These can be beneficial if interest rates are likely to rise but if they fall, you can end up paying more than the going rate. They are, however, good for budgeting since you know how much your repayments are going to be over a certain period of time.
Discounted or tracker mortgages – where you pay a certain percentage lower or higher than the standard variable rate or the Bank of England base rate.
Other incentives such as cash back or payment for valuations or legal costs – these can be beneficial but because they vary with each individual lender, you should always make sure that they are suitable for your particular circumstances.
Quite often, if you try to remortgage or move house within a certain period, while you have a mortgage with incentives such as these, you may have to pay a penalty. This may be waived if you go back to the same lender for a new mortgage on a related purchase or remortgage.
At Onions & Davies, we would always recommend that you take advice from a suitably qualified and experienced mortgage adviser. We can recommend appropriate companies if you would like us to.
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This information refers to the law of England & Wales only, which from time to time changes. In particular, tax information changes annually. It is not a substitute for professional advice, which is up to date and specific to your needs. This information is a summary of the provisions relating to equity release and cannot cover every aspect of their operation. It represents our understanding of current legislation in England and Wales but should not be relied upon as an authoritative statement of law nor as constituting advice. We would advise that legal advice be sought in every circumstance.