Mortgages

A mortgage is a loan (debt) agreement with a financial organisation (usually a bank or bulding society), where you agree to borrow an amount of money to purchase a house and agree to pay instalments to repay both the interest and capital.

Now a days banks do not worry so much if you do not pay of the capital, instead they roll the mortgage over i.e. extend its term (these are called Interest only mortgages. Most of the mortgage types described below can come as interest only. Do not be fooled, these mortgages do not save you money in fact they cost you significantly more! The banks job is to part you from your money!

Repayment mortgage

This is the traditional mortgage, each month you pay of the interest and part of the capital. Recently, these have been out of fashion however, they are a good solid mortgage.

Variable rate mortgage

A variable rate can change whenever the bank feels like changing it.

Tracker rate mortgage

A tracker rate mortgage tracks the Bank of England base rate. When the base rate goes up then the mortgage rate goes up by the same amount and vice-verca.

Fixed rate mortgage

A fixed rate mortgage is fixed for however long you agree the term of the fix. This can be useful if you want piece of mind to know how much you are paying but you can often end up paying more unless the interest rate moves in your favour.

Self cert or self certification mortgage

If you are self-employed or can't prove your income then this mortgage is based on affordability. It has been widely abused though and has played its part in driving up property prices.

Flexible Mortgage

Flexible terms often meaning that you can take payment breaks and overpay on your mortgage repayments without penalty.

Endowment Mortgage

With these mortgages you paid of the interest each money and also paid some money in to an investment fund. The intent was that the investment fund would grow faster than you simply paying of the capital. However, with the Financial Crisis of the 1980's and 1990's these investment funds lost a lot of money and people suddenly found themselves recieving letters warning them that on maturity the fund would not pay of the mortgage. A miss-selling scandal subsequently errupted.

See also