uk : mortgage : f.a.q

What's the difference between a repayment and an interest-only mortgage?

What is a sub-prime or adverse credit mortgage?

What is a Mortgage Indemnity Guarantee?

What's the difference between a repayment and an interest-only mortgage?

They are different ways of paying back a loan. If you choose a repayment mortgage you make monthly payments of capital (the lump sum you borrowed) and interest so that at the end of the mortgage period the loan has been completely repaid.

An interest-only mortgage is linked to an investment, such as an Individual Savings Account (Isa) or an endowment policy. For the duration of the loan you pay a monthly interest payment on the mortgage itself and a monthly premium for the endowment policy. With an Isa mortgage, you pay a regular sum into the account, which is then invested. At the end of the term the Isa or endowment is used to repay the loan. If there is a surplus, it is yours to keep.

What is a sub-prime or adverse credit mortgage?

People who have had credit problems in the past, or who can't prove their income, can struggle to find a mortgage on the high street. The "non-conforming" or "sub--prime" mortgage market is an alternative option for people who have had mortgage arrears or County Court judgments (CCJs) in the past. People who have been self-employed for a short while and don't have the accounts to back up their application might also have to turn to the non-conforming market. These loans, though, generally cost more than standard mortgages so before you go to a sub-prime lender, it might be worth going to a mortgage broker who might be able to negotiate a better deal.

What is a Mortgage Indemnity Guarantee?

A mortgage indemnity guarantee (Mig) is an insurance policy that borrowers have to take out if they borrow a large percentage of a property's value. Typically, this is for loans over 90%, but some lenders do charge Migs on smaller loans.A Mig pays the bank or building society if the borrower is forced to sell his or her home. The policy doesn't protect the borrower from debt. In fact, the Mig insurer can still sue the borrower for any losses. This has made Migs unpopular, and some lenders have now scrapped them.

What is a Secured Loan?

It is a bank loan designed exclusively for home owners which uses the net value of their property as security for the loan. As a result of inflation and part repayment of mortgages many home owners have a property which is worth far more than the mortgage they owe on it. A secured loan enables you to make use of this asset by providing security for your loan, whether you own a house, flat, bungalow or cottage.

Is my loan application confidential ?

Yes. Information about your application and account will not be used without your writtenagreement.

Can I apply for a loan if I am self-employed?

Yes. Please indicate your current net income in the application form.

What happens if I am ill or become unemployed?

An optional Protected Payments Plan insurance is now available to cover your loan repayments if you are unable to work owing to causes such as illness or unemployment.

What happens if I want to settle my loan account early?

You can do this any time and receive a rebate against future charges complying with the Consumer Credit (Rebate on Early Settlement) Regulations 1983.

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