Mortgages A-Z
Mortgage Types Explained
100% Mortgages
Traditionally, before buying a house, people saved up a deposit of between 5-15% of the value of the house they wished to buy. Most mortgage lenders insisted on this, as it ensured that there would still be equity in the house even if prices fell, and so the lender could recoup the debt by repossessing if necessary.
As house prices have rocketed in recent years, it has become harder to save a deposit - especially as rental costs have also risen.
These days though, more and more lenders will provide a mortgage for the full value of the house - a 100% mortgage - which means that no deposit is necessary.
100% mortgages are generally more expensive than normal mortgages, so it's worth trying to save even a 5% deposit if at all possible.
Adverse Credit
Adverse credit is the term used in the industry to describe a bad credit rating. Having an adverse credit score makes it more difficult to get a mortgage, but it's still possible - you'll just have to pay more in interest charges, and will probably need to pay an arrangement fee and provide a deposit.
Buy to Let
Buy to Let mortgages are mortgages specifically designed for landlords who want to rent out the property being mortgaged.
These mortgages have become very popular recently, as buying property has been seen by many as a better investment than the stockmarket.
Capped Rate
With a capped rate mortgage, the interest rate charged is guaranteed not to rise above a certain figure, whatever happens to the base rate.
Endowments
These are a form of interest-only mortgage, where a portion of your repayments are invested on the stockmarket with the aim of both paying off your mortgage at the end of the term, and providing a profit in the form of a lump sum bonus.
Popular in the 1980s and 1990s, they have now fallen from favour after a string of mis-selling scandals which have left people facing shortfalls.
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