Mortgages

For most people, your home will be the largest single investment you will ever make, so making the wrong decision can become a very expensive mistake. Taking the wrong mortgage can end up costing thousands extra over the lifetime of the loan, and what appears to be the cheapest on day one will not always prove to be so over an extended period of time.

Furthermore, to add to the confusion, there are now a bewildering number of mortgage types available to select from.

Abacus Money Management Ltd offer a full mortgage advice and implementation service with access to all lenders. Having established your precise borrowing requirements, our mortgage research will enable us to make the most appropriate recommendations. Our on-line links with lenders can significantly reduce the processing time for applications.

Our range of mortgage services includes residential, investment and commercial lending.

To make a truly informed decision, call us on Freephone 0800 840 7111 and ask for an appointment with one of our advisers.

Capital and interest | Interest OnlyFlexible MortgagesEquity Release

Your home may be repossessed if you do not keep up repayments on your mortgage.

Where a fee is charged for arranging a mortgage, our typical fee is 1% of the advance, or we can recieve commission from the lender depending on your specific circumstances.

Capital and interest

This is the simplest type of mortgage. The payments you make to the lender every month pay off both the capital and the interest from the loan. Provided you keep up the payments, you are guaranteed to pay off the loan by the end of the term agreed (usually 25 years).The lender calculates your monthly repayments depending on the amount borrowed, how long for, the interest rate & how the rate you have chosen is set. Top

Interest only

Don’t you mean endowment mortgage?

For many people, interest only mortgages are called ‘endowment mortgages’ or even ‘pension mortgages’, but strictly speaking these names describe an interest only mortgage plus the method by which it is repaid. In other words, an endowment mortgage is an interest only loan that is repaid by the proceeds of an endowment policy etc.

How they Work

An interest only mortgage is where the lender (a bank or building society usually) only charges you interest on the loan you’ve agreed. You don’t pay the capital back until the end of the mortgage. The lender will usually ask you at the outset, to provide an investment plan of one type or another to repay the loan at the end of the term, such as an endowment policy or ISA savings plan, but sometimes they will leave the repayment plan entirely up to you.

Every month, you then pay this interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon how the rate you have chosen is set. At the end of the loan period, the lender will expect the initial capital they lend you to be repaid in full by whatever means you have arranged. Most lenders will insist that borrowers have a repayment mortgage to ensure that the mortgage is repaid at the end of the mortgage term. Top

Your home may be repossessed if you do not keep up repayments on your mortgage.

Flexible Mortgages

The flexible mortgage is a relatively new type of mortgage, or at least new in the UK. It was invented & has been used in Australia for many years, but is now growing in popularity in this country as more and more lenders adopt it.

The traditional UK mortgage has been with us for many generations. It was designed with the assumption that people had full time employment and could therefore cope with set monthly payments for a 25 year period. However, as many people have discovered, the traditional mortgage does not always cope well with modern employment trends, such as contract working, self employment, job sharing and part time work.

This is where the flexible mortgage comes in. It has the facility for both over and underpayments built into the loan. What this means is you can overpay your mortgage when finances allow (pay rise, bonus, an inheritance etc.), and then, providing you have made overpayments in the past, underpay when finances are tight (job loss, change in circumstance etc).

How they work

If you overpay your loan by £50/month for say five years on a flexible mortgage, that cumulative amount is then made available as a cash reserve for you to draw on at any time during the remainder of the mortgage term. This cash reserve can normally be drawn on for such things as, taking payment holidays or making large purchases. Indeed some lenders actually issue the borrower with a cheque book and encourage them to use the account as an all encompassing bank account. However the amount you can withdraw is limited by the original sum of the loan.

The main benefit of borrowing against your ‘mortgage account’ is that mortgages are usually the cheapest form of borrowing. In other words, you’ll pay less interest on the amount you borrow!

If on the other hand, you overpay but never make any withdrawals, you can save a significant amount of interest over the life of the loan. This is because most lenders who offer this type of loan calculate the interest you pay on a daily basis (see what to look for), therefore any overpayment comes immediately off the debt and interest payments are adjusted accordingly. Top

Equity Release

Equity release is a way of releasing a sum of money from your home without having to move out of it. There are two main types of equity release schemes available today – Lifetime Mortgages, and Home Reversions.

How they work

Lifetime mortgages are aimed at clients who have at least attained age 55 and wish to raise capital from the equity in their home, whilst retaining ownership. They should have little or no current mortgage. A lifetime mortgage is secured against the value of the property. There are no monthly repayments, interest is rolled up and added to the original loan over the term. The amount available is based on the age of the applicant and the value of the property. The loan is repaid when moving into long-term care, or death, at which point the property is sold and the loan plus the accrued interest is repaid to the lender. Interest can be fixed for the term of the loan.

Home Reversions again are aimed at clients who wish to raise capital, although wth a home reversion, part or all of the property is sold to a home reversion company. A lease is created to allow the applicant to continue living in the property. The amount available is usually significantly lower than the property value. Top

S.H.I.P (Safe Home Income Plans)/ Equity Release Council

This organisation was formed in 1991. Many Lifetime Mortgage providers support the SHIP code of conduct to provide fair, clear, easy to understand documentation. The SHIP no negative equity guarantee means that you will never owe more than the value of your home.

To understand the features and risks of a lifetime mortgage, please ask for a personalised illustration.