Mortgage Brokers Gloucestershire
Mortgage Brokers Gloucestershire
Mortgage Brokers Gloucestershire
 
Mortgages


For most people, your home will be the largest single investment you will ever make, so making the wrong decision can become a very expensive mistake. Taking the wrong mortgage can end up costing thousands extra over the lifetime of the loan, and what appears to be the cheapest on day one will not always prove to be so over an extended period of time.

Furthermore, to add to the confusion, there are now a bewildering number of mortgage types available to select from. We've written an overview of some of these in the accompanying pages, but to make a truly informed decision, call us on 01453 750739 and ask for an appointment with one of our advisers.

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Repayment Mortgages

This is the simplest type of mortgage. The payments you make to the lender every month pay off both the capital and the interest from the loan. Provided you keep up the payments, you are guaranteed to pay off the loan by the end of the term agreed (usually 25 years).

The lender calculates your monthly repayments depending on the amount borrowed, how long for, the interest rate & how the rate you have chosen is set.

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Interest Only Mortgages

Don't you mean endowment mortgage?
For many people, interest only mortgages are called 'endowment mortgages' or even 'pension mortgages', but strictly speaking these names describe an interest only mortgage plus the method by which it is repaid. In other words, an endowment mortgage is an interest only loan that is repaid by the proceeds of an endowment policy etc.

How they Work
An interest only mortgage is where the lender (a bank or building society usually) only charges you interest on the loan you've agreed. You don't pay the capital back until the end of the mortgage. The lender will usually ask you at the outset, to provide an investment plan of one type or another to repay the loan at the end of the term, such as an endowment policy or ISA savings plan, but sometimes they will leave the repayment plan entirely up to you.

Every month, you then pay this interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon how the rate you have chosen is set. At the end of the loan period, the lender will expect the initial capital they lend you to be repaid in full by whatever means you have arranged.

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Flexible Mortgages

The flexible mortgage is a relatively new type of mortgage, or at least new in the UK. It was invented & has been used in Australia for many years, but is now growing in popularity in this country as more and more lenders adopt it.

A bit of background
The traditional UK mortgage has been with us for many generations. It was designed with the assumption that people had full time employment and could therefore cope with set monthly payments for a 25 year period. However, as many people have discovered, the traditional mortgage does not always cope well with modern employment trends, such as contract working, self employment, job sharing and part time work.

This is where the flexible mortgage comes in. It has the facility for both over and underpayments built into the loan. What this means is you can overpay your mortgage when finances allow (pay rise, bonus, an inheritance etc.), and then, providing you have made overpayments in the past, underpay when finances are tight (job loss, change in circumstance etc).

A Generic Example
If you overpay your loan by £50/month for say five years on a flexible mortgage, that cumulative amount is then made available as a cash reserve for you to draw on at any time during the remainder of the mortgage term. This cash reserve can normally be drawn on for such things as, taking payment holidays or making large purchases. Indeed some lenders actually issue the borrower with a cheque book and encourage them to use the account as an all encompassing bank account. However the amount you can withdraw is limited by the original sum of the loan.

The main benefit of borrowing against your 'mortgage account' is that mortgages are usually the cheapest form of borrowing. In other words, you'll pay less interest on the amount you borrow!

If on the other hand, you overpay but never make any withdrawals, you can save a significant amount of interest over the life of the loan. This is because most lenders who offer this type of loan calculate the interest you pay on a daily basis (see what to look for), therefore any overpayment comes immediately off the debt and interest payments are adjusted accordingly.

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Lifetime Mortgages

What can equity release be used for?
The money that you release from your home’s value can be used in any way you want. The most common purposes are:

* Home improvements;
* Improving lifestyle;
* Private medical care;
* Helping family members.

What else should I consider?
Equity release products involve borrowing against, or selling your home. It is a long-term financial commitment. You need to be absolutely sure this is your best option. As impartial specialists, we can help you consider other ways of generating cash or income before recommending an equity release plan. This could include:

* Cashing in existing savings or investments;
* Moving to a smaller home; 
* Utilising local authority grants;
* Making sure you are claiming all the benefits you are entitled to; 
* Family loans.

You should also consider the ways that equity release might actually reduce the benefits you are entitled to. Means tested benefits such as the Pension Credit, and Age Allowance may reduce if you increase your income.

Equity release plans will reduce the value of your estate on your death and in some cases, using equity release might mean that none of your property's value is left to your heirs. In the case of Lifetime Mortgages that add the loan interest to the amount you owe there are usually guarantees to ensure you never owe more than the property is worth. Without this guarantee it is possible to end up owing more than your house is worth.

We strongly recommend discussing your intentions with your family before making a decision.  

Am I eligible for equity release?

* Are you a homeowner? 
* Are you (or you and your partner) over 55? 
* Is the property your main private residence?  
* Is your home worth at least £40,000?

Answering yes to any of the above means you are almost certainly eligible for an equity release plan. Several factors can influence providers’ decisions. The younger you start an equity release plan, the higher value your property will need to be. Neither your income nor state of health has any bearing on eligibility. However, if you are in poor health, equity release may not be the most suitable option.

Are there additional costs involved?
Yes, the equity release lender will want to know how much your property is worth on application and will charge to administer and set up the scheme. In most cases you’ll have to pay: 

Provider arrangement or application fees, usually between £300 and £800. 

A valuation property fee, to check your property provides enough security for the loan.

For a £100,000 property, this is likely to be between £300 and £600. 

Legal fees, usually between £300 and £600. You should ask solicitors for a fee breakdown before proceeding.

Some lenders and reversion companies may refund some or all of these fees when the loan has been set up. In addition, you’ll still need to take out building insurance for all the time the plan is in place. Lenders may make a charge if you decide to repay the loan early.

Equity Release’ includes home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.  

Gateway Specialist Advise Services Ltd can be paid for their advice by commission or by fee which is 1.25% of the total amount released, subject to a minimum of £1450.

You can choose how we are paid for mortgages; pay a fee of 0.50% of the loan amount, or we can accept commission from the lender.

For advice on Equity release we act as introducers to Gateway Specialist Advice Services Ltd.

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Your home may be repossessed if you do not keep up repayments on your mortgage.



 
 

Contact BDM


Do you require expert mortgage advice?
Call us today on 01453 750 739
Email. brian@bdmfinancial.co.uk
We are always happy to help and assist you... 


Mortgages Gloucestershire | Mortgage Brokers Gloucestershire | Mortgage Advice Gloucestershire | Financial Advice Gloucestershire | Mortgage Brokers In Gloucestershire

Registered Address: 68 Peghouse Rise, Stroud, Glos, GL5 1UR . Registered in England. Reg No. 4997591

Call us today on 01453 750 739
Email. brian@bdmfinancial.co.uk