Buy to Let Mortgage
Buy to Let Mortgages are extremely popular and are taken by investors who wish to purchase a property using a mortgage, with the sole intention of letting outing out this property to a non-related third party. Following mass introduction in the early 1990’s many landlords have earned their fortunes via the Buy To Let mortgage market. The rent charged for a buy to let property usually covers the mortgage payments by at least 125% and on top of this the boom in property prices has meant that the equity has increased in many of these properties, enabling many landlords to raise further capital to expand their property portfolio.
Owner occupier and investment mortgages are the two main types of commercial mortgage. These mortgages deal with different situations. An owner occupier mortgage caters for clients buying business properties to use for their own business purpose; in contrast a commercial investment mortgage is for people who are looking to purchase a property for an investment purpose i.e. To Let to another business who in return will pay rent.
This type of mortgage is when the interest on the outstanding mortgage balance is calculated on a daily basis. When a payment is made it reduces the balance from the day after. The effect is that because the balance has reduced quicker less interest is paid ensuring that you pay less money back throughout the term of the mortgage.
Another benefit is that if you overpay it will save you even more money as not only will the interest paid be less but the term of the mortgage could also be reduced.
Discount Mortgage
This is when the lender offers a discount or reduction for a set period off the standard variable mortgage rate (SVR). Monthly mortgage payments will reflect this discount until the end of the set period at which time the rate normally reverts to the SVR mortgage rate which is often unfortunately usually considerably higher than the discount mortgage offer.
The advantage of a discount rate mortgage is that the borrower knows how much the increase will be from the day the discount ends. If for example the discount is 1% off the SVR rate this could mean a saving of £75 a month for the discount period, then when the discount ends payments will increase by £75.
Discounted rates can be the lowest rates in the market at any given time and would be beneficial if the economy is going to remain stable in the future and also if the Bank of England decide not to increase the base rate.
The ‘Fixed Rate’ Mortgage
Fixed rate mortgages are exactly what they say they are – fixed rate. This means that your monthly repayment remains the same for the fixed period of your product. Knowing exactly how much is going to be paid out in fixed rate mortgage repayments every month means that you can plan your finances carefully. It also means you can take full advantage of the fixed rate mortgage deals that are around at the moment and have a mortgage that is not affected by the change in the Bank of England Base Rate.
Equity Release
Equity release plans, also called lifetime mortgages, home reversion schemes or home income plans, are a way for people to release cash from their homes to spend as they wish. Whether you want to buy a new car, pay for a holiday, home improvements or simply to make daily life more comfortable, equity release plans allow you to borrow money against the value of your home, with the debt being repaid from the proceeds of the sale of your property after your death. You also remain the homeowner and are entitled to remain in the property for the rest of your life. Plans often also include a no negative equity guarantee ensuring that no funds can be taken from your estate after death.
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