Mortgages - the most vital purchase of your entire life is your home. This site looks at the way you buy that home, which unless you have a lot of cash, is using a mortgage.
Firstly, there is an explanation of how lenders calculate interest rates on certain mortgage products. This is important to understand, as the more that you can understand the different types of mortgage, the better your chances of finding the right one for you. Interest is the way that you pay the mortgage lender for the service that they provide in lending you such a large amount of money. Whatever you borrow, that is the capital, the interest will include the administration costs to the lender, the interest that they are having to pay to borrow the chunk of money that they are passing onto you, a risk component depending on the type of borrower you are, and then an opportunity to make a profit, which, as a business, most lenders will reasonably want to do.
Then we look at the specialist mortgage types which people can use when their mortgage needs aren't standard. Non-standard mortgages encompass a wide variety of purposes, from adverse credit mortgages for people with bad credit histories to mortgages for people who are self-employed. Those mortgages cover the self-employed who can provide about three years audited accounts and the self-certification mortgages where people will get their accountant to certify the level of their income. There is also the buy-to-let type of mortgage, where people take out a mortgage used purely to buy a property to rent out.
Mortgage protection insurance is taken out with reference to the fact that when you take out a loan secured on your home you need to be prepared for the accidents, illnesses or redundancy which can threaten the safety of your income. Should you lose your income, you may not be able to keep up payments on your home and may even lose it. So mortgage protection insurance covers you for events that you can't control.
Finally, we run through the new mortgage types that have been created to take account of the changing needs of mortgage borrowers. There is an offset mortgage, which reduces the amount you owe on loans or mortgages by the amount in your savings accounts. The current account mortgage turns your current account into a massive overdraft, with all incomings and outgoings leaving and entering that account. The stepped rate mortgage gradually reduces a discount on a mortgage, but enables you to get a discount longer. Flexible mortgages allow you to overpay, underpay and take payment holidays. Meanwhile, tracker mortgages see the interest rate follow the Bank of England base rate up and down.
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