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What is a Fixed Rate Mortgage?
As the term implies, with a fixed rate mortgage the mortgage rate is fixed for a set period of time, so no matter what movements occur in the lenders standard variable mortgage rate, the borrowers arrangement is fixed and, therefore, so are the monthly fixed rate mortgage payments.
A fixed rate mortgage would suit someone who likes to know where they stand. A fixed rate mortgage, as suggested by the name, is a mortgage where equal repayments are made every month.
Fixed rate mortgages allow you to easily manage and plan your monthly expenditure - because the payment will be the same every month and you wont be affected by any rises in the base rate. If the interest rates rise above the fixed rate on your mortgage, you will see the real benefits of the fixed rate mortgage.
A fixed rate mortgage makes it easy to plan ahead, because as the name suggests, the interest rate on your mortgage stays fixed.
This means that as a fixed rate mortgage customer, even if the Bank of England Base Rate changes, the interest rate on your mortgage remains constant over a fixed period of time. This makes your budgeting easier, because you can plan ahead knowing exactly how much your monthly repayments will be.
The fixed rate period can be anything between six months and five years, but its always best to refer to a financial services professional before deciding what period of fixed interest rate to choose.
The biggest advantage of a fixed rate is that irrespective of fluctuations in interest rates, your monthly repayments remain the same throughout the period of the fixed rate - usually six months to five years.
A fixed rate mortgage is suitable if your mortgage repayments take up a large proportion of your income as it protects you from rises in interest rates. However, you would not benefit from any reduction in the lenders standard variable rate.
Fixed rate mortgages generally incur a penalty if redeemed within the fixed rate period.
The advantage of a fixed rate mortgage is that you know exactly how much your mortgage will cost, and for how long. If interest rates on your mortgage rise, well the fixed rate will not. Conversely, however, when mortgage rates drop, your fixed rate mortgage will not drop with them.
The key benefit of a fixed rate mortgage is that you are able to accurately budget your repayments for a set period of time. In addition, fixed rate mortgages are an excellent option, if it becomes apparent that interest rates may be rising over the coming years, as you can protect your mortgage repayments against rises by choosing a fixed rate mortgage.
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What is a Self-Employed Mortgage?
Self-employed mortgages, as the term implies are mortgages designed for those that are self-employed. Traditionally its been more difficult for the self-employed to get mortgages.
Mortgage lenders preferred to see the regular income guaranteed by employment. However this has changed in recent years. There are now mortgage lenders who specialise in the self-employed market.
If you are self-employed or unable to prove your income, it can be difficult finding a suitable mortgage. There are a number of reasons why it is often more difficult for those in such situations, the main ones are that the income of the person tends to fluctuate, and they are unable to prove their income like those regularly employed who can produce payslips.
Self-employed people may experience a problem finding a mortgage. Those in standard full-time employment are basically guaranteed to be paid, and can get references from their employer as well as be able to show their payslips therefore proving their income. Mortgage lenders like this as it cuts down their risks.
If you are self-employed or working on a short-term contract, you could be financially solvent, and able to keep up payments easily, but that doesnt make it easy for you to prove that you will keep up payments to your mortgage lender. They want to know that that you will be able to keep up payments for a full term, usually 25 years, not just over the next year.
If you have no proof of income because you are self-employed and do not have three years worth of accounts it is unlikely that any high street mortgage lender will offer you a mortgage.
Being self-employed , and not having a regular or provable income neednt prevent you from getting the mortgage that you need, there are specialist lenders in the market who offer mortgages for these circumstances.
There are lenders that will offer you a mortgage on basis that you self certify your income, nevertheless, youd still need to have a sizeable deposit to put down to lessen the lenders risk. For this deposit of 15-20% the lenders do not check employment records or ask for your accountant to clarify your earnings.
Mortgage lenders will want to see three years audited accounts from a certified accountant before they consider a mortgage for the self-employed. If you do not have three years accounts you may be able to get a self-certification mortgage by declaring your income. You have to provide a certificate from your accountant for your last few years mortgage statements.
Some specialist mortgage lenders have targeted the self-employment mortgage market by providing some solutions that offer a more flexible approach to match the working pattern of someone who is self-employed. This means that they accept that when you are self-employed you may enjoy periods of high income but you may also suffer from periods of low income. Your mortgage should reflect that, enabling you to overpay and underpay when you need.
Those with a reasonable amount of deposit but unable to show their true earnings would suit this type of mortgage.
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Choosing a Mortgage Lender
Just as there are many types of mortgages and mortgage deals to choose from, there are also many sources where you can go to get a mortgage. Your key choices are to use a mortgage broker, a more general financial adviser, or shop around yourself and go direct to the mortgage lender. For many people, choosing a lender means finding a mortgage company offering the lowest APR rate.
If you decide to use an adviser you can choose between a specialist mortgage broker and a general financial adviser. A general adviser will look at all your financial affairs if you want, not just your mortgage. As opposed to lenders who can only offer their own products, an adviser can look at the whole market for you and consider mortgages from a number of lenders. Advisers can also offer you advice and information tailored to your needs. In the UK, All firms or Individuals arranging or advising on mortgages must be authorised to do so by the Financial Services Authority (FSA). If you are unhappy with advice from an authorised firm you usually have the right to complain and may be able to claim compensation.
As an alternative to using a financial adviser, you can arrange a mortgage directly with a lender ? like a building society, bank or specialist mortgage company. A lender will only recommend their own mortgage products although they may have several you can choose from.
When choosing a lender, you should consider the competitiveness of the lender?s rates, their fees and penalties, their customer service and their reputation. You?ll also want a lender you can trust, and someone you can work with effectively. Remember you?ll have to deal with this company for many years to come.
1. Building Societies
Building societies are mortgage experts, they offer specialist advice and they usually offer very competitive rates. Many national ones have a branch in most major towns and cities while the smaller ones tend to specialise in catering for home buyers in particular areas. For example, the Cambridge Building Society specializes in helping people who live in Cambridgeshire.
2. High Street Banks
Banks usually have years of lending experience and they have more branches and greater coverage across the United Kingdom. Their standard rates tend to be higher than those of building societies but they often offer the best introductory offers on mortgage deals. Some of the big banks now have special arrangements with building societies where the building society is the one that handles all the mortgage business for the bank.
3. Specialist Mortgage Lending Companies
Specialist lenders lend to a particular type of niche market. Many of these specialise in providing mortgages for people in special circumstances who would not normally be offered a loan by their bank or building society. This includes people with adverse credit, the self-employed, part-time employed and those purchasing overseas properties. Many mainstream lenders have established specialist subsidiaries for non-standard mortgages such as these. You may have to deal with them over the phone, by mail or over the internet as most of them do not have a wide network of branches across the country.
4. Insurance Companies
Some insurance companies offer mortgages and other financial products together with their range of insurance products. They may sometimes offer certain deals in association with other financial institutions such as banks but they do not specialise in this area and they may not necessarily offer the best rates.
5. Intermediaries and Mortgage Brokers
Instead of going directly to the lender for a mortgage, you can approach an advisor or broker to search the market for the best mortgage deal for you. Some intermediaries are tied to particular lenders and they may only offer products from their lender. Others are independent so they have a much wider market to choose from. A credit broker is a firm or person who introduces you to a lender for the purpose of borrowing money. The task of the credit broker is to obtain the loan you require on terms that are acceptable to you.
Whatever you decide, it?s important to understand how mortgages are regulated and sold in the United Kingdom. Buying with advice puts you in a stronger position to complain and get compensation if you later discover that the mortgage is unsuitable. You can read some more articles about mortgages at: http://www.august1.com
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