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Today's UK Mortgage Providers...     Introduction - For most people taking out a mortgage will be the biggest amount of money they will borrow in their life and it represents a serious financial commitment. In recent years, property has been seen as a good bet and property ownership in the United Kingdom is immensely popular and the equity growth in property values quite staggering. However, understanding the mortgage maze is quire daunting and there seems to be a never ending supply of different types of mortgage available offering different terms, different interest rates, different incentives and different penalties if you decide to switch product provider during the term of the loan. The following information on this page is of a general nature only and does not constitute advice. Sourcing and sorting your mortgage is one area where an Independent Financial Advisor can really help you. Getting Started - For most people a mortgage is required to purchase a property whether it be for owner occupied purposes or purchased as a buy to let. An in principle decision from a mortgage lender will need to be provided for you and you can then will a degree of certainty make an offer on the property of your choice. The product provider will confirm that they are prepared to loan you a sum of money and at what terms and in some cases (particularly where a favourable deal is on offer, you may be able to �book� the money in advance in return for a booking fee). The mortgage lender will also want you to take out a buildings insurance policy and have their interest noted on the policy. The policy is usually put in to place on the day that you exchange contracts A survey will also have to be arranged on the property and with effect from 1st June 2007 anyone selling or advertising a property for sale will have to produce a home information pack containing important information on the building for sale. Types of Mortgage - there are large numbers of different mortgage types available including the following:- 1. Repayment mortgage 2. Endowment Mortgage 3. Pension Mortgage 4. Interest Only mortgage 5. Buy to let Mortgage 6. Foreign Currency mortgage 7. Capped Mortgage 8. Fixed rate mortgage. 9. Tracker Mortgage As you can see, there are quite a few different types, now factor in different arrangement fees, interest rates, discount times etc, you can see that you do actually need someone to help you locate the best deals. The main types of mortgage terms you will encounter are as follows; The repayment mortgage - The repayment mortgage was for the years the only real way of repaying your loan. Every month, you make a payment to the mortgage company, part of which was reduces the capital amount owed and the balance is used to pay the interest on the outstanding amount. In the early years, most of the payments go towards the interest as this is gradually reduced, more and more of the capital is paid off. The mortgage company will usually expect you to have a term life insurance policy of some description to pay of the mortgage in the event of your death before the final repayment is made. If you are going to arrange a term life insurance policy, it may be a good idea to take a flexible policy that will allow you to increase the sum insured after a few years. Many people take out a mortgage only to find that in a few years, they may want extra funds to extend the property or they actually move house and require more funding. If the mortgage is taken out in more than one name , then terms insurance on a joint life first death basis is usually available. Interest - Under this type of mortgage, you simply repay the amount of interest only on the loan, it will never diminish and at the end of the period, you will have to find all of the money to repay the amount owed. Persons take taking out an interest only mortgage will be expected to take out a term life insurance policy and should give consideration as to how they intend to repay the at a the end of the policy period. This type of loan has been popular with investors who buy property to speculate that the value of the property will rise, they only hold the property for a number of years, they sell it again using the equity to repay the loan and to make a profit. Endowment Mortgage - At one point this method of paying for a mortgage was very popular, however it has gone in decline of late with many insurance companies actually withdrawing their contracts altogether., Devised at a time when interest rates were high, it was thought that paying money to an insurance company to invest, instead of paying off the capital sum on the mortgage was a good way to repay your mortgage. The endowment provider would issue a policy which included an element of life insurance and a guaranteed future policy value However, this value was always less than the amount required to pay off the loan and it was hoped that with investment and added bonuses, at the end of the policy term there would be enough left over to not only repay the loan but also to provide a lump sum to then policyholder as well. As interest rates in recent years have been low, product providers have been unable to obtain the return on investment as anticipated; consequently many people�s endowments look like falling short of being able to repay the total amount of mortgage money outstanding. Buy to Let Mortgage - This is the name given to a range of products that are provided to give funding for landlords buying property for rental purposes. These buy to let mortgage loans are now very popular and easy to come by, interest rates are comparable or slightly higher than standard home owner loans and you can usually choose if you wish to pay interest only or repayment Fixed Rated Mortgage - This is a mortgage where the actually rate of interest charged does not move with market fluctuations. This means you can fix your monthly repayments in advance, knowing that for a set period of time, your monthly payments will not increase. Of course, they won�t decrease either, so if you lock your self in to this type of product at a time when interest rates are high, you will not obtain the benefit if interest rates drop. Fixed rate mortgages can last anything from a few months to 25 years and new fixed rate periods are being introduced all the time. If you decide to cancel your deal, you will usually find that the product provider has some severe redemption penalties. Capped rate mortgage - This is a mortgage that is guaranteed not to rise above a specific rate (called the 'cap') within a set period of time. If it rises above this ceiling the rate charged will remain at the capped level. At advantage of this type of loan is that you do receive the benefit of falling g interest rates if they occur Tracker Mortgage -This is a variable mortgage that is either above or below the Bank of England's Base Rate by a set percentage within a set period. As the bank of England base rate changes either up or down so will the tracker mortgage at the agreed amount. Pension mortgage -This is an interest only mortgage which is supported by a Personal Pension Plan. Interest only is paid to the lender and in addition premiums are paid into a Personal Pension Plan. On your retirement a portion of the personal pension fund can be taken as a tax free cash sum and it is this cash lump sum (or a part of it if greater) which is used to repay the mortgage amount outstanding. Foreign Currency Mortgage - At the present moment, 99 % of mortgage borrows take out their loan in sterling and pay interest calculated on the bank of England base rate. A foreign tracker mortgage is becoming popular particularly with borrowers that have very high monthly repayments. Instead of lending you your funds in sterling, the lender will advance you money in Euros, Dollars or Yen for example. The debt is then converted to sterling and you this amount to purchase your property. Each month you make payments in sterling and this is then converted to the currency that has been supplied to you and on which you are paying interest. This type of loan does carry a degree of risk and it should be remembered that if sterling weaken against the lending currency, your monthly repayments may increase significantly Mortgage Indemnity Policy - Mortgage Indemnity policies are far less prevalent now than they were a few years ago and much work has been carried out by the council of mortgage lenders who have instigated a voluntary code for it�s members to provide clear explanations as to the purpose of this policy. This form of insurance policy is almost always paid for by the borrower for the benefit of the lender. They have proved to be a great source of contention over the years and are not insisted on nearly so often. This type of policy is also known as a mortgage Indemnity guarantee In simple terms a mortgage Indemnity policy is requested by the lender where there is a perceived increase chance that the borrower will default on the loan. Usually this involved borrowers who request high percentage to valuation amounts. The lender traditionally likes to provide up to 75-80% of the loan, expecting the borrower to have saved to provide the remaining amount. If for example you required to lend 95% of the property value, the lender may require an insurance policy for the remaining amount. In the case where a building is valued a at �100,000 and the standard loan amount is 75%, if you required 95% , the mortgage indemnity policy would cover the difference being �20,000. This policy is sourced by the lender and the required premium is a once only payment and can be added to the cost of the loan.   back to top