A Glossary Of Uk Mortgages

2007-10-11 Word Count: 598 Category: Mortgages

This article is designed to help teach you about UK mortgages. If you don't understand the language of the UK mortgage loans market then you will have a major problem when considering the most suitable mortgage for you.

The glossary below is intended to outline the differences between the numerous "flavours" of mortgage available to people looking to buy a property with a view to helping them determine which would be the best one for them and their financial situation.

UK Mortgage Types

Interest Only - Interest only mortgages enable you to borrow money and repay the interest alone for the duration of the mortgage loan. At the end of the loan period the full amount of the mortgage borrowed must be paid up.

Repayment Mortgages - The monthly mortgage repayments with this mortgage include both interest and capital repayments. At the end of the loan term the mortgage is deemed to be paid up.

Endowments - Endowments are really an mixture of an interest only loan with an endowment plan that is calculated to pay off the capital amount borrowed at the expiry of the term.

Mortgage Pensions - Like an endowment mortgage loan, pension mortgages are also a mix of an interest only loan which is repayed upon retirement when the borrower's pension fund can cover the mortgage.

Investment Mortgages - An interest only loan that requires some type of investment to pay off the capital amount at the expiry of the loan term. Examples of investments could be ISAs (Individual Savings Accounts), PEPs (Personal Equity Plans) or any other kind of investment.

Adverse Credit Mortgages - A specific type of loan aimed at people who have a poor credit score.

Offset - An offset mortgage will allow you to lower your interest repayments by off setting a credit balance.

Foreign Currency - Your mortgage amount is transferred into a foreign currency in order to reduce interest repayments by taking advantage of exchange rate variances.

Flexible Mortgages - Gives you the flexibility to over pay without earning an additional charge.

Buy-to-Let Mortgages - A type of mortgage designed to help you to acquire a property that you want to let to tenants.

Let-to-Buy Mortgages - A type of mortgage designed to help you to let your present property in order to buy another.

Non-Status Mortgages - A kind of mortgage where your income does not play a part in calculating how much you can borrow.

Traditional Forms of Interest Attached to Mortgages

Fixed Rate - These are rates that remain fixed for an agreed period of time. This will usually be two, three, five or ten years. Longer term fixed rates will probably be more expensive and also less common than smaller fixed terms.

Standard Variable Interest Rate - The Standard Variable Rate (SVR) is a default interest rate offered to people who are seeking a mortgage loan.

Discount Rates - A discount rate occurs when there has been a lengthy period of elapsed time in which the SVR has been low. This period is often calculated over 1 to 5 years.

Variable Rates - Variable rates are the antonym of fixed rates. Rates in this kind of interest agreement are qualified according to a given lender's discretion.

Capped Rates - Capped Rates have many similarities to fixed rates in the sense that interest will not vary above a certain level. However beneath this level the rate can vary. Some capped rate deals also include terms called collar rates which will also fix a lower end rate that will not change.

Tracker Rates - Tracker Rates are linked to the Bank of England Base Rate.