Types of Mortgages

Lenders have developed many different types of mortgages, which offer borrowers different ways to repay.

Property loans

  • Take out a loan or mortgage on your property for development.
  • Choose from short term bridging loans or longer term development finance and commercial mortgages.
  • Ask your bank or for competitive rates and property expertise apply to a private property lender.

Repayment mortgage

  • Monthly repayments include a sum for the interest on the amount borrowed, and a sum to pay off some of the capital of the mortgage.
  • Normally, the bank or building society would also require a life assurance protection policy to be taken out. Ask us about insurance.

Interest-only mortgages

There are various forms of ‘interest only’ payment plans. The monthly repayment consists only of interest on the amount borrowed. The capital is not repaid monthly as part of the mortgage payment, but by means of a separate savings plan of some sort. The most usual are:

  • endowment mortgages
  • pension mortgages
  • ISA mortgages

Endowment mortgages

  • This is a mortgage where you take out an endowment life assurance policy for the term of the loan and for the amount you borrowed.
  • You make the premiums to the life assurance company.
  • When the term of the mortgage is over, the life assurance policy matures, and the money is used to replay the capital of the mortgage.
  • This also provides the life assurance protection to repay the mortgage.

This form of mortgage has recently come under criticism because many plans were sold with generous forecasts. Unfortunately, policies haven’t generated enough money to repay the mortgage. Ask your financial advisor for assistance if you have an endowment mortgage.

Accelerator mortgages

  • They are a cross between a mortgage and a bank account. Find out more.
  • The mortgage is considered as an overdraft on a bank account. Interest earned on money paid into the account goes towards paying off the mortgage loan.

Further Information

The Office of Fair Trading is a government body dedicated to protecting consumers’ rights. Consumer Direct is their telephone and online service for offering advice on consumer issues, and it can offer help on everything to do with buying and selling your home.

For more information about mortgages and regulations, visit Mortgages Made Clear created by the FSA (Financial Services Authority) or for cheaper mortgage rates see 1stplusmortgages.