In recent years the mortgage marketplace has become extremely competitive and whilst this has, undoubtedly, been good news for you, the consumer, it is felt that the level of competition and the variety of the products available has caused confusion for the consumer when they come to decide which mortgage really is for them.

To help you through this, described below are some of the generic basics of mortgage products, with further, more specific advice available by completing the Mortgage Request Form

Repayment

Despite all of te products available, repayment centres around two forms - Capital and Interest and Interest only.

With Capital and Interest, it is normal for equal monthly instalments to be made throughout the term of the mortgage which, once the payments are complete, will see the initial sum borrowed repaid in full.

For interest only, as the name suggests, only the interest that falls due on the initial sum borrowed, is covered during the life of the mortgage. At the end of the mortgage term the initial sum remains outstanding. It is therefore important that a secondary repayment vehicle is available to meet the repayment of the initial sum. Without such a repayment vehicle, the lender could impose the sale of the property in order that they are repaid.

Mortgage Term

In general this has been a maximum of either 25, or in some instances, 30 years. In recent times there have been offers of 40 year mortgages in an attempt to make the housing market accessible to first time buyers as house prices rise.

Amount

Whilst it is possible for 100% - or sometimes more - of the value of the property to be borrowed, it is much more common to see the purchaser make a deposit towards the purchase price of 5/10% or more and then borrow the balance.

Traditionally, the amount that could be borrowed was calculated using a multiplier of the borrowers income, normally 3 or3 ½ times. However, as interest rates have fallen in recent times, more and more institutions, whilst still looking at income multipliers, are also looking at overall affordability which means that it may be possible to obtain a mortgage that traditionally would not have been possible due to the level of the applicants income. This is of course a risky approach because a mortgage is a long term commitment and even the best cannot predict what mortgage rates will be over the course of the next 25 years.

Interest Rates

In the majority of cases, the interest rate that the borrower pays is linked to bank base rate, although other set rates can be used such as the London Inter Bank Offered Rate (LIBOR)

In most instances, the interest rate will either be variable, in that it would move, usually in line, with any change in, say Bank Base Rate, or Fixed, usually for a period of up to five years, although it has been known to obtain fixtures for 10 years.

In addition to the above, the lender will also require a charge over the borrowers property and it must be remembered that your house is at risk if you fail to maintain the mortgage repayments.