With the mortgage market providing increasingly more choice, it is important to decide the type of mortgage that best suits your needs.
Below are brief explanations of the various mortgage schemes available. Your JXP Consultancy Advisor will be able to provide you with more information and assist you in finding the most suitable mortgage deal.
STANDARD VARIABLE RATE MORTGAGES
FIXED RATE MORTGAGES
DISCOUNTED RATE MORTGAGES
TRACKER MORTGAGES
BUY TO LET MORTGAGES
HOW MORTGAGES APPLICATIONS WORK
STEP BY STEP MORTGAGE HELP
Standard Variable Rate Mortgages
With this type of mortgage, the interest rate rises and falls during the mortgage term. These changes are decided by the lender, and will usually be roughly 2% above the Bank of England Base Rate.
PLEASE NOTE: When the interest rate goes up, your monthly payment will also increase. Likewise, when the interest rate falls, your payments will become less.
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Fixed Rate Mortgages
This type of mortgage has a set interest rate for an agreed period of time. This means that no matter what interest rates do during the set period (up or down), your mortgage payments will remain the same. This can be comforting if you have a tight budget because you will never have to pay any extra should the interest rate increase.
However, should interest rates fall, your mortgage payments will stay the same until the end of the agreed period, so you should carefully consider how long you want to be locked into the same rate.
Lenders have fixed deals ranging from one to ten years, and sometimes even longer. At the end of the fixed term, the interest rate will usually revert to the lender’s standard variable rate.
Fixed Rate Mortgages will usually have an early repayment charge should you wish to switch to a different loan or pay off your mortgage during the fixed period. This means that you may have to pay a fairly hefty charge should your circumstances change before the end of the agreed time. However, some lenders will allow you to transfer the deal and the rate to a new property if you move.
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Discounted Rate Mortgages
A discounted Rate Mortgage offers a discount on the lender’s standard variable rate, for a set period of time, ranging from about one to five years. At the end of this period the interest rate usually reverts to the lender’s standard variable rate.
Discounted Rate Mortgage sometimes have an early repayment charge if you change products or pay off the loan during the initial period.
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Tracker Mortgages
A Tracker Mortgage is similar to a Discounted Mortgage as there is an initial low variable interest rate; however a tracker mortgage tracks the Bank of England base rate, rather than the bank’s standard variable rate.
With a Tracker Mortgage, you have the security of knowing that your payments can only increase in line with the country’s interest rates, rather than whenever the lender decides to change its standard variable rate.
As with a Discounted Rate Mortgage, a Tracker may also have an early repayment charge during the initial period.
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Buy to Let Mortgages
Buy to Let Mortgages are tailored specifically for property you want to buy and then let out. They may be any of the above types of product, but differ from residential mortgages in that most lenders will not expect your income to meet the monthly repayments. Instead, the monthly rental income on the property needs to be higher than the mortgage payment (usually by between 20 and 30%). This will be confirmed by the surveyor who values the property during the mortgage application process.
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How Mortgage Application Works
A mortgage application involves several steps and takes on average about two months to complete (although this is dependant on various factors within the process, so should only be taken as a rough guide). The amount you will be able to borrow is determined mainly by your income. The process for determining this amount varies from lender to lender, but normally you can borrow between 3 and 5 times your income on a single application, and 2 and 4 times your income on a joint application. Other factors that can affect this are your credit score and the amount of deposit you put down.
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STEP BY STEP MORTGAGE HELP FROM JXP
Your JXP Mortgage Advisers will help you through the process step-by-step, working out how much you can borrow, how much it will cost, and what type of mortgage may be most suitable for you. They will even take care of all the mortgage paperwork for you, so you don't need to worry about a thing.
