Learn About UK Mortgages
{{{Mortgages|Mortgage Loans|Mortgage Vocabulary}}} {{{Checklist|Made Easy|Made Simple|For the Uninitiated}}}
The following article is intended to help educate you about mortgages in the UK. If you can't understand the language of the UK mortgage market then you will have a grave problem when thinking about the right mortgage for you.
The glossary below is intended to explain the differences between the various "flavours" of mortgage available to UK property buyers with a view to helping them decide which would be the right one for them and their financial situation.
The Varieties of UK Mortgage
Interest Only - An interest only mortgage will allow you to borrow money and repay interest only for the duration of the mortgage loan. At the end of the term the full amount of the mortgage borrowed must be payed off.
Repayment - The monthly mortgage repayments with this mortgage include both capital and interest repayments. At the end of the agreed term the mortgage is considered paid up.
Endowment Mortgages - An endowment mortgage is for all intents and purposes an combination of an interest only mortgage with an endowment policy that is calculated to repay the loan amount borrowed when the mortgage term expires.
Mortgage Pensions - Like an endowment mortgage, pension mortgages are also a blend of an interest only loan which is paid up upon retirement when the borrower's pension scheme can pay off the sum borrowed.
Investment Backed Mortgages - This is an interest only arrangement that uses some type of investment to repay the mortgage amount at the expiry of the agreed term. Examples of investments could be an ISA (Individual Savings Accounts), a PEP (Personal Equity Plans) or some other form of investment. Adverse Credit Mortgages - This is a specific type of mortgage aimed at people who have poor credit.
Offset - An offset mortgage will allow you to lower your interest repayments by off setting a credit balance.
Foreign Currency Mortgages - Your mortgage amount is exchanged into a foreign currency to decrease interest payments by taking advantage of exchange rate fluctuations.
Flexible - A flexible Mortgage gives you the flexibility to make over payments without picking up an additional charge.
Buy-to-Let - Mortgages designed to assist you to acquire a property that you want to let to tenants.
Let-to-Buy Mortgages - Mortgages designed to assist you to let your existing property in order to buy another.
Non-Status Mortgage Loans - A kind of mortgage where your income does not play a part in determining how much can be borrowed.
Traditional Interest Arrangements Attached to Mortgage Loans
Fixed Rate - These are rates that remain static for an agreed duration. This will most likely be 2, 3, 5 or 10 years. Longer term fixed rates will generally be more expensive and also less common than smaller fixed terms.
Standard Variable Interest Rate - The SVR (Standard Variable Rate) is a default rate of interest that is offered to people who are seeking a mortgage loan.
Discount Rates - A discount rate occurs when there has been a significant period of elapsed time in which the SVR has been low. This period is generally calculated over one to five years.
Variable Rates - Variable rates are the antonym of fixed rates. Rates in this kind of interest scheme are determined according to a given lender's discretion.
Capped Rates - Capped Rates have several similarities to fixed rates in terms that interest will not vary higher than a certain level. However below this level the rate can be variable. Some capped rate shemes also have things called collar rates which will also fix a lower floor rate that will not change.
Tracker Rates - Tracker Rates are releated to the Bank of England Base Rate.
About the Author
Javier Melendez is a writer for various UK mortgage websites such as the Loan-Seeker site. His recent articles concern First Plus Loan products.
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