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Repayment Methods & Schemes

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A Repayment Mortgage is structured so that the monthly mortgage payments, comprising partly of
capital and partly of interest, pay off the original amount borrowed as well as the interest that would
be accrued over the mortgage term, by the end of the term.

Interest only
So called due to the fact that you only pay interest to the lender each month. The original loan
amount remains the same for the term of the loan. Therefore, a suitable means of repaying the debt
at the end of the term is required. If you require advice on the most suitable vehicle for you, you
should seek advice from an Independent Financial Advisor.

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Mortgage Schemes

Fixed Rates
This is a mortgage rate where the interest rate is agreed at the start of the mortgage and will not change during the term of the fixed rate.

This means that you know exactly how much your monthly payment will be each month during the fixed rate period.

Tracker Rates
This is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. Therefore, when the Base Rate changes, the rate on your tracker mortgage changes by the same amount.

For example, if the Base Rate increases by 0.25% then your mortgage payments will increase by 0.25%.

Capped Rate
This is a type of loan where a maximum rate of interest is set at the start of the mortgage term. During the capped rate period the interest rate can fall below the capped rate but will never rise above it.

What this means for you the borrower is that you know how high the mortgage payments could rise but are guaranteed the rate will not go any higher, therefore making home loan budgeting easier.

Discount Rate
A discounted rate mortgage offers you reduced repayments for a given term. This interest rate is discounted from the published lender standard variable rate, for an agreed period from the start of the mortgage.

What this means for you the borrower is that you are guaranteed to pay a set amount below the standard variable rate for the period of the discount. The standard rate can go up and down, whereas the amount discounted remains the same. For example, if there is a discount of 1% from the lenders standard variable rate of 5.5% you will pay 4.5% within the discounted rate period. If the lenders standard variable rate increases to 6% then you will pay 5% within the discounted rate period.

Standard Variable Rate
This rate can go down as well as up during the course of your mortgage and is usually determined by the lender. It is sometimes linked to the Bank of England Base Rate but not always.

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Mortgage Fees

Early Repayment Charge
If you pay off your mortgage in full or make overpayments in excess of the amount agreed by your lender at the outset you may be asked to pay an early repayment charge by your lender.

This charge is raised in order to recover any losses or costs incurred by your lender as a result of your early payment.

Arrangement Fee
These are usually charged by the lender when arranging a loan on certain products. They can usually be added to the loan.

A higher arrangement fee will often provide a lower interest rate; however, it is not always worth the extra cost. Speak to one of our advisors for advice on this matter.

Valuation Fee
This fee is for an independent assessment of the value of a property carried out by an approved surveyor and paid for by you the customer.

All lenders insist that a valuation is carried out on a property. The valuation is used by the bank or building society to decide how much they are willing to lend you.

Higher Lending Charge
This is the term used for insurance for the lender for you defaulting on your payments when your property is worth less than the loan or in some cases this charge is payable when you are only able to pay a small deposit.

There are many mortgages that do not carry this charge and based on your situation it is possible that this type of charge can be avoided altogether.

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