Mortgage Guide
Register now and let Comptons independent mortgage advisor have an informal chat to help you choose the right mortgage for you.
Comptons Treating Customers Fairly
Steve Compton head of the financial services department has 25 years experience in the mortgage industry. With all his knowledge, his team can offer a truly independent service using a vast network of lenders.
The Financial Services Authority regulates the mortgage industry* and they have published a charter called Treating Customers Fairly. This is based on six core principles, which should be an integral part of the service provided by any organisation involved in mortgage lending or arranging.
The Six Core Principles:
- Give the Customer what they have paid for
- Do not take Advantage of the Customer
- Offer the Customer the Best Product you can
- Do your best to resolve mistakes as quickly as possible
- Show Flexibility, Empathy and Consideration towards Customers
- Exhibit Clarity in all Customer dealings
"To recommend the mortgage solution we would be happy to choose for ourselves, given the same needs and circumstances, and work diligently on your behalf to ensure an efficient and timely completion."
At Comptons we are customer lead and at all times we will endeavor to be honest and professional in our approach. All our advisors conduct a personal review in order to ascertain the correct way forward to meet your needs.
Types of Mortgage Product
Once you have received your review you need to decide on the overall method of repaying the mortgage, i.e. Capital Repayment, Interest Only or Part & Part, there are choices available as to the type of mortgage product you want. This is largely a personal decision, which will can be dependent on the element of risk each client wants to take.
Fixed rate mortgage
Fundamentally, you have a fixed rate of interest applied to your loan for a set period of time, i.e. 5.85% fixed for 2 years. Correspondingly, the monthly repayment will be fixed for the same period so the product will particularly appeal to first time buyers, young families and borrowers with large mortgages - anyone in fact who needs the stability of set monthly payments.
Fixed rates are generally a little higher than on variable products but this is easily compensated by the peace of mind offered.
Traditionally, fixed rate periods have centred on 2,3 and 5 years but some lenders are now offering longer term fixes of 7,10,15 and 25 years.
Tracker mortgage
The most common of the variable rate mortgages, it follows or tracks movements in the Bank of England Base Rate for a set period of time, i.e. Bank Base Rate (BBR) + 0.25% for 2 years. Trackers will generally offer lower rates than fixes but monthly repayments can fluctuate up or down in line with movements in BBR. This can appeal to borrowers who want lower monthly repayments but who can afford higher repayments if rates rise.
Discount mortgage
Another variable rate mortgage, it works by offering a set discount off a lender’s standard variable rate (SVR) for a set period of time, i.e. SVR less 2% Discount for 2 years.
Each lender sets their own SVR but generally, they sit around 2% above Bank Base Rate as a rough guide. Discount mortgages often offer the lowest monthly cost but repayments can fluctuate up and down, as a rise in BBR will prompt lenders to raise their standard variable rate by the same margin. Note that if BBR drops by say 0.5%, lenders are not obliged to drop their SVR by the same amount. On this count, trackers prove the better option as there is no ‘middleman’ effect - they are directly linked to Bank Base Rate.
Capped mortgage
On paper this product offers the best of both worlds as it guarantees that your interest rate will not rise above a ‘capped’ rate but allows it to fall if there is a drop in BBR. It might be offered as: 5.99% Capped at 6.50% for 2 years. The downside can be that the initial start rate, here 5.99% is higher than 2 year fixed rates on offer – in effect you pay a little more for the possible benefit of a drop in interest rates during the product period.
Additionally, only a few lenders tend to offer capped rates so product choice is limited.
A good bet if you can ‘guess the market’ correctly and find a really competitive deal.
Flexible mortgage
Originally tagged the ‘Aussie mortgage’ due to its origins down under. Their concept was a mortgage where interest on the outstanding balance was calculated daily (rather than yearly as had been the tradition in the UK) with facilities for overpayments, underpayments and payment holidays.
Flexible mortgages are now a well established sector of the UK lending market.
While it is always beneficial to have interest calculated daily – many fixed, discount and tracker products now do this - flexible mortgages generally carry a slightly higher rate of interest so thought should be given as to whether all the ‘whistles and bells’ features are really needed. The most keenly priced fixed rates will often allow a 10% per annum overpayment facility - £10,000 on a £100,000 mortgage – which is usually more than sufficient for most borrowers.
A self-employed person with fluctuating or seasonal income might feel best served by a flexible mortgage – overpayments could be made in summer and normal or reduced payments in winter. A reserve built up from overpayments could be borrowed back to pay an income tax bill whilst less interest would have been paid on the mortgage due to the earlier overpayments. Interest saved from consistently overpaying and less fee expenditure on periodic remortgaging should outweigh the slightly higher interest rate.
Offset mortgage
The principle of an offset mortgage is to utilise savings funds to reduce interest paid on the mortgage borrowing, i.e. your mortgage is £125,000 but you have savings of £25,000 (the interest on which may be liable to tax). You elect to put your £25,000 savings into an offsetting ‘pot’ – the fund does not accrue any interest but you save by only paying mortgage interest on £100,000 for as long as £25,000 remains in the pot. You have ready access to your savings at any time. Some offset mortgages have a current account facility, which allows your salary to add to the offsetting for as long as the account remains in credit.
As with flexible mortgages, offsets carry a slightly higher rate of interest but the aim is to save in the long term by paying less interest. This type of mortgage would be of particular appeal to a high rate taxpayer who has a sizeable mortgage but also a substantial savings fund.
COMPTONS CAN HELP TO SECURE THE MORTGAGE THAT IS RIGHT FOR YOU.
Your home is at risk if you do not keep up your repayments.
