The right mortgage can help open up your finances and the wrong mortgage can cost you thousands. We can advise on the best lending options available to you, incorporating them into your financial plan. See more at Brightside Mortgages.
There are plenty of things to consider in arranging a Mortgage; What can you afford, what if you ever can’t make a payment, will the payments stay the same etc. It’s most likely going to be one of the biggest financial commitments you’ll ever make so it makes sense to have a little independent advice and assistance along the way.
There a number of different types of Mortgages and loan facilities available, some of the most used we have looked at below.
Generally, if you are going to buy a house, you’re going to need a Mortgage. It is simply a loan provided to you in respect of a property; your home. You will agree an appropriate Mortgage value with your lender, usually dependent on the cost of the property, your own income and the length of time you want to repay it over, and they’ll provide you the money to purchase the property.
A Buy-to-Let (BTL) Mortgage is designed specifically for individuals buying additional properties to then rent out and receive income. Generally, the costs of a Buy-to-Let Mortgage will be higher than your standard residential mortgage, with interest rates and fees often higher, as well as usually requiring a higher deposit in the first instance. Furthermore, most BTL Mortgages are on an ‘Interest-Only’ basis, meaning that your payments are only paying for the cost of the Loan, and at the end of the mortgage term, you will need to provide a means by which to pay off the outstanding loan. Alternatively, you could sell the property and repay the loan or re-mortgage the property again, using a BTL mortgage.
Serviced Letting Mortgages
Purpose-built mortgages for those with holiday or short term letting properties. Serviced Letting Mortgages often have a very specific list of requirements in order to lend money to individuals including evidence of experience in letting the property.
Equity Release is simply a way of accessing the ‘money’ that is tied up in your home. There are two main types; a Lifetime Mortgage and a Home Reversion Plan.
A Lifetime Mortgage is where you take out a mortgage on your home in order to receive cash in the form of a lump sum or a regular income. The loan is then paid back when you no longer require the home (e.g. Death or moving into Care). It’s important to realise that upon your death your home may need to be sold swiftly to repay the loan, and as such may be at a lower price that you would have liked.
A Home Reversion Plan is where you actually sell a part of your home in return for cash. You are allowed to live in the property as normal until you die, at which point the property will be sold and the respective portions of the proceeds go to your estate and the provider. Again, upon its sale, your property may not raise the funds you expected and any intended bequests may be significantly reduced.
There are exclusions and limits on both types of plan, including the age at which you can take them out, the amount you can withdraw and how much interest you would need to pay. It’s also generally considered expensive as a means of providing income with arrangement fees and loan interest fees often equating to thousands of pounds.
Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.
A Bridging Loan is a special type of Loan designed to fund a short-term gap between two property transactions. They are often used by individuals to secure a loan for a property quickly, to then replace it later with an appropriate Mortgage or to bridge a gap when an individual purchases a new property but has not yet sold their existing one.
However, it is important to understand that these are short-term loans with high interest charges. Were an individual to keep a Bridging Loan over the long-term they would most likely incur interest charges of around 20% per year.
Bridging loans are provided by referral only.