Residential Mortgages - DGS Chartered Financial Planners

Residential Mortgages

Arranging a mortgage is one of the largest single transactions in most people experience in their lifetime. Buying a property can be a stressful and time consuming experience, although nowadays the financing of a mortgage is a case of finding and selecting the most suitable deal, rather than simply accepting a lender’s offer. There are many banks and building societies to choose from, plus a number of smaller niche lenders competing for your business, and they all offer a variety of interest rate deals, for example:-

  1. Fixed rates, typically over 2, 3, and 5 years
  2. Tracker rates (which usually track the Bank of England base rate)
  3. Discounted rates, which provide a discount off the standard variable rate over a set period of time
  4. Offset deals, which allow you to offset your savings against your mortgage, thereby enabling you to pay the loan off at a quicker rate

Enhancements on offer include a reduction in Arrangement Fees for First Time Buyers, Cashback options to help offset the cost of buying a property, and free property valuations and/or legal fees, particularly when re-mortgaging.

There are two main methods of repaying a mortgage loan.  A description of these is provided below.  It may also be possible to set up the mortgage on a ‘part repayment and part interest only’ basis.

Repayment (capital and interest) mortgages:

Under a repayment mortgage your monthly repayments consist of both interest and capital, hence over time the amount of money you owe will decrease.  In the early years your repayments will consist of more interest than capital, therefore the capital outstanding will reduce more slowly in the early years than it will in the latter years.

This method ensures that the mortgage is repaid at the end of the term, providing all payments are made on time and in full.

Interest only mortgages

As the name suggests, with an interest only mortgage you only repay the interest on the mortgage.  At the end of the term the capital is still outstanding.  Therefore, you will usually need to take out some kind of investment policy to save up enough money to repay the mortgage at the end of the term.

Traditionally the preferred product for repaying the capital of an interest only mortgage was a mortgage endowment policy (which included a set amount of life cover) – although more recently customers are using Individual Savings Accounts (ISAs) and pensions to build up a sufficient sum and to take advantage of the tax breaks offered by these products.  It is worth remembering that this method of repayment needs a high degree of monitoring to ensure that there are sufficient funds available to clear the mortgage balance in full when it is due.

Note: very few lenders currently offer an interest only facility.

AS A MORTGAGE IS SECURED AGAINST YOUR HOME, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.

SOME TYPES OF BUY TO LET, BRIDGING AND DEVELOPMENT MORTGAGES MAY NOT BE REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

At DGS we try to avoid charging Broker Fees, particularly for mortgages over £200,000, or when the fee we receive from the lender is deemed to be sufficient to pay for our services.  However, in some circumstances a Broker Fee may be payable.  This would typically be between 0.25% and 0.5% of the loan.  For example; a mortgage loan of £100,000 would typically incur a Broker Fee of £250.  However, we will discuss your payment options with you and confirm the actual amount payable before we begin to provide our services.  Generally, existing DGS customers are not charged a Broker Fee.  The Broker Fee will also be waived for new customers when additional services are required, e.g mortgage life cover, etc.

There are a range of protection policies you should consider when using a mortgage to purchase your home:

DGS have offices in London, Hertfordshire and the Midlands. We have a dedicated team of Independent Financial Advisers (IFA) and Chartered Financial Planners who can ensure you are receiving the right financial advice and the highest standard of service.

We also hold ‘Chartered Financial Planner’ status.  To find out more about what that means for you, click here.

 

For a free consultation to discuss your Residential Mortgages requirements together with any other financial needs

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