Mortgages Guide

Limetree Financial Services Limited

Mortgages Guide

This is only a brief summary. For the full guide click below.

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A mortgage is a special loan for buying property, where the property is security for the loan. Paying back the mortgage includes capital (the amount borrowed) plus interest.

Traditional mortgages are arranged over a 25 year term with payments due monthly. Changing the term length will change the amount due each month.

For lenders to assess your mortgage application they will obtain a credit check.

Repaying the mortgage

Repayment mortgage – where you pay back part of the capital as well as the interest due each month

Interest only mortgage – where you only pay the interest on the loan each month and pay off the capital at the end of the loan term

Different interest rates

Fixed rate – you pay a set rate for a set period of time with no changes.

Variable rate – the monthly repayments can go up and down according to the lender’s interest rate, usually linked to the Bank of England base rate.

Tracker rate – a variable rate linked to the Bank of England base rate by a fixed amount.

Discount rate – a variable rate that is discounted from the lender’s standard rate as a short-term offer.

Capped rate – a variable rate where your payments are capped at an agreed rate, even if the interest rate goes higher. A ‘collar’ is a variation of the capped mortgage, where there is a rate below which your mortgage cannot fall.

Flexible mortgages – usually a variable rate mortgage, with flexible features such as allowing overpayments and varying amounts and timing of monthly payments.

Mortgage arrangement fees

Valuation fee – lenders require a standard valuation report of the property you are to purchase. Fee payable with the mortgage application and usually non refundable.

Booking fee/arrangement fee – charged by lenders for setting up mortgages other than standard variable ones.

Legal fees – paying a solicitor to do the conveyancing.

Stamp duty land tax – government tax on the purchase of property, payable at completion, between 1 and 4% of purchase price, depending on cost of property.

Mortgage broker fees – your broker should inform you up front of the cost of their advice and assistance.

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