Mortgages

A mortgage is a loan that is used to perchase a property and it is secured on the property that it is used to purchase.

Many companies such as banks and building societies offer mortgages. The property is held by the lender until the debt is paid. A mortgage is probably the largest debt that you will enter into and is bound by a written agreement. The lender can take your home as collateral if you do not make the monthly payments. Mortgage terms are all different and can span and be repaid over anything from 10 to 30 years.

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The main three types of mortgage that are most commonly used are known as: capped rate mortgage, variable rate mortgage and fixed rate mortgage, there are other mortgages that are variations on these three mentioned and the variations are offered in order to entice customers. If mortgage repayments are not kept up then your property is at risk. If you default on any repayments it can adversely affect your credit rating.

UK Variable Rate Mortgages
The interest fluctuates with variable rate mortgages according to the Bank of England’s base rate which can vary greatly. Iif there are signs that the interest rate is going to drop in the future or it is going to stay low then this type of mortgage is probably the best type to go for. With variable rate mortgages repayments will go up and down with the interest rate. (see also Tracker Mortgages)

UK Capped Rate Mortgages
With a capped UK mortgage the interest is kept at an agreed rate for a stipulated period of time. There are some variations, mortgage repayments can be lower than the capped rate if the base interest rate is lower than the capped rate, but if interest rates are higher than the capped rate, the repayments stay at the agreed capped rate.
A capped rate mortgage can give you the security of knowing the highest repayment you will be required to make.

UK Fixed Rate Mortgages
On a fixed rate mortgage the interest rate is kept the same throughout the term of the loan. On acceptance of the mortgage the term of the loan is agreed. An advantage of the fixed rate mortgage is that the consumer knows exactly how much they are paying during the duration of the loan.
A disadvantage is that should interest rates fall the consumer would still has to pay the agreed rate.
Fixed rate mortgages often tie customers into a mortgage for a period of time and when attempting to leave before their fixed term arrangement ends the borrower may be charged a fee.

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Related glossary terms to UK Mortgages:
Adverse Credit | Credit Checks | Building Reports | CCJ's | Defaults | Arrears | Bad Credit | Buy to Let | APR | Estate Agents | Early Redemption Penalties | Exchange Contracts | Gazumping | Loan To Value | Mortgage Term | Negative Equity | Stamp Duty | Bank of England Base Rate