Annual Management Fee
For certain investments, a charge
made every year for running
your fund. It is usually a percentage
of the amount you've built up.
<back>
APR (Annual Percentage
Rate)
There are many ways that lenders
can calculate interest, and
this makes it difficult for
comparisons to be made between
the different mortgage offers.
To try to get around this, regulations
require the lender's advertisement
or offer to show a percentage
rate, which takes into account
the charges you have to pay
as well as interest. <back>
Capital
& Interest or Repayment
Mortgage
Each payment consists of capital
and interest, so that at the
end of the mortgage
term the capital, together
with the interest is completely
repaid. Some lenders require
a term assurance be taken out
to cover the mortgage in the
event of death before the end
of the mortgage
term. <back>
CAT
Standards
were introduced by the Government
to help the public understand
which mortgages fulfil standards
for low charges, access and
fair terms. <back>
Endowment Backed Mortgage
An interest-only mortgage repaid
using an endowment policy as
the investment vehicle. An endowment
policy combines life assurance
and savings. This type of policy
is intended, but not guaranteed,
to repay the loan at maturity,
but will also repay the loan
if you should unfortunately
die during the term of the policy.
Because the endowment policy
may leave a shortfall, many
companies offer review facilities
to ensure that the policy stays
on track. <back>
Flexible mortgage
The lender may allow you to
make extra loan repayments,
to underpay, or to suspend payments
for a certain amount of time
or to borrow additional monies.
If the flexible mortgage is
a capital and repayment one,
some lenders require a term
assurance be taken out to cover
the mortgage in the event of
death before the end of the
mortgage
term. <back>
State
Benefits
If you are unable to pay your
mortgage due to unemployment
or illness there are two potential
state benefits:
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Homeowners
Mortgage Support
A government
backed scheme offered
by participating lenders,
which allows borrowers
who have faced a sudden
drop in income to negotiate
an affordable monthly
repayment, and delay interest
charges.
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Support
for Mortgage Interest
You may get help with
mortgage interest payments
as part of your benefits
if you are a homeowner
and are eligible for: |
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Income
Support |
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Income-based
Jobseeker’s Allowance |
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|
Income-related
Employment and Support
Allowance |
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|
Pension
Credit |
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If
you are eligible you can
apply for help with the
interest repayments on
up to £200,000 of
your mortgage. The benefit
commences 13 weeks from
the date of the claim.
<back> |
Insurance
Homebuyers should consider the
following types of insurance:
|
Buildings
and Contents |
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Your
lender will require the
property to be covered
by buildings insurance
and in some cases mortgages
are conditional on the
buildings and contents
insurance being taken
with the lender. |
|
Payment
Protection Insurance |
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This
can be arranged for a
monthly premium. It will
cover your mortgage repayments
if you have an accident
or are sick or unemployed,
usually up to a period
of twelve months. Check
the policy carefully to
make sure that you are
covered and when you will
receive the money, as
some will not start your
payments until a certain
period has elapsed. |
|
Mortgage
Indemnity Insurance |
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This
may be required by a lender
where a mortgage exceeds
a certain percentage of
the valuation of the property,
usually 75%. You may be
required to pay a single
fee for Mortgage Indemnity
Guarantee (MIG) insurance,
which is to protect the
lender if you cannot pay
your mortgage and your
property is subsequently
taken into possession.
The fee varies from lender
to lender, but can be
substantial. The fee is
normally paid upon completion,
although in some cases
it can be added to your
mortgage. This insurance
will protect the lender
and will not protect you
if your property is subsequently
taken into possession
and sold for less than
the amount you owe. You
will remain liable to
pay all sums owing including
arrears, interest and
your lender's legal fees.
If a claim is paid to
your lender under such
insurance, the insurers
generally have the right
to recover this amount
from you. These policies
are unusual at the present
time, but may return.
Please contact us if you
require any clarification
or further information. |
<back>
Interest Only mortgage
This is a mortgage where interest
only is payable and the capital
is intended to be repaid at
the end of the term by an appropriate
repayment vehicle such as ISAs,
PEPs, pensions or endowment
policies. Thus, the amount of
the loan remains relatively
constant during the mortgage
term. <back>
Interest
Rates
|
Variable
Rate |
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This
is the standard interest
rate of the lender. The
rate will change whenever
the lender alters its
lending rate, going up
or down (as do your payments)
in line with market forces.
There can be quite a difference
between lenders and it
is worthwhile shopping
around. |
|
Discounted
Rate |
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This
is a specified discount
off the variable rate
for a nominated period.
Therefore, during the
discounted period, the
rate payable will change
whenever the lender changes
its variable rate. At
the end of the discount
period the rate usually
reverts to the variable
rate.
|
|
Fixed
Rate |
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The
interest rate is fixed
for a specified period
at a specified rate. At
the end of the fixed term,
the rate will either change
to the lender's variable
rate or, subject to the
terms offered by the individual
lender, a new rate. |
|
Capped
Rate |
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The
interest rate provided
by the lender is guaranteed
not to rise above a specified
level for an agreed period
of the loan, but may fall
below it. At the end of
this period the interest
rate will revert to the
lender's variable rate.
|
|
Capped
& Collared Rate |
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The
interest rate will not
exceed a maximum rate
(cap) or fall below a
minimum rate (collar)
for a fixed period. At
the end of the period
the rate reverts to the
lender's variable rate.
|
ISA
mortgage
ISAs are savings accounts that
let you save in cash, equities
(bonds, gilts, shares and unit
trusts), life insurance policies
or any combination of the three,
without having to pay tax on
the income you get from them
or on any gain you make when
you sell them. They can be used
in conjunction with interest
only mortgages to pay off the
loan at the end of the term.
There are specified limits on
how much can be paid into the
different types of ISAs. If
the ISA does not have a life
insurance element, some lenders
may require a separate term
assurance be taken out for the
term of the loan. <back>
Life
Assurance
A general term for life cover,
which may or may not include
an investment element, whether
mortgage related or not. <back>
Maturity
The word used to describe the
date, other than when a claim
is made, on which a contract
taken out for a specific length
of time becomes payable by the
product provider. <back>
Mortgage
Term
The length of time agreed by
the lender for you to repay
your mortgage. <back>
Negative Equity
The value of the asset (e.g.
your house) used to secure a
loan is less than the amount
of the loan <back>
PEP
mortgage
Personal Equity Plans (PEPs)
were replaced by ISAs in April
1999. You can no longer invest
new money in a PEP, but can
continue to hold an existing
one for as long as you like,
or transfer an existing PEP
to a new provider. They can
be used in conjunction with
interest only mortgages to pay
off the loan at the end of the
term. <back>
Pension-Linked
mortgage
is an interest only mortgage
that uses the lump sum from
a personal pension to pay off
the loan amount at the end of
the loan term. As a personal
pension benefits from tax relief,
a pension-linked mortgage is
tax efficient, although levels
and bases of, and reliefs from,
taxation are subject to change
and the value of the tax relief
will depend on the circumstances
of the individual investor.
If the pension arrangement does
not have sufficient life insurance
linked to it, some lenders may
require a term assurance be
taken out to cover the loan
for the term of the mortgage.
<back>
Stamp
duty
The tax a buyer pays if the
property they are buying costs
over £125,000 (unless
they are a first time buyer).
| Purchase Price/
lease premium or transfer
value |
SDLT rate |
SDLT rate for
first time buyers |
| Up to £125,000 |
Zero |
Zero |
| £125,000 to £250,000 |
1% |
Zero |
| £250,001 to £500,000 |
3% |
3% |
| Over £500,000 |
4% |
4% |
Levels and bases of, and
reliefs from, taxation are subject
to change. <back>
Stock
Market
Where stocks and shares are
bought and sold. <back>
Unit
Linked
Your contributions buy units
in the selected fund. The value
of the units depends on the
underlying assets in the fund.
Consequently the value of your
fund can go down or up. There
is a wide range of funds to
choose from: some are relatively
low risk and others can be very
speculative. <back>
With
Profit
At the end of each year the
company declares the reversionary
bonuses (also known as 'regular'
or 'annual'). These bonuses
are added to the value of the
fund and once added, cannot
be taken away - although the
product provider will usually
reserve the right to apply a
'Market Value Adjuster'. Reversionary
bonuses are guaranteed to be
paid in full on the contractual
maturity date. A Market Value
Adjuster (also known as 'Market
Level Adjuster' or 'Market Value
Reduction') is a type of penalty
applied on early encashment.
It is usually applied when the
stock market is falling or fluctuating
rapidly. The idea is to ensure
the surrender value received
is not unrealistic when compared
with the underlying assets of
the fund. A further bonus may
be paid on the contractual maturity
date or on a death claim. This
is called the 'terminal' or
'final' bonus. A factsheet
(pdf file, 105kb) on with profit
policies can be found on the
FSA
Consumer Help website.
<back>
If you have not found the information you are looking for, further information on residential mortgages and insurance can be found at www.hedgelandsmortgages.co.uk.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
For mortgage advice we
can charge a fee of typically
£500 or we can receive
commission from the lender.
|
Hedgelands Financial Services,
Hedgelands, Abbotskerswell, Newton Abbot, TQ12 5PW
Hedgelands Financial Services
is a trading name of Honister
Partners Ltd. Honister
Partners Ltd is an appointed
representative of Sage
Financial Services Ltd,
which is authorised and
regulated by the Financial
Services Authority. Sage
Financial Services Ltd
is entered on the FSA
register (www.fsa.gov.uk)
under reference 150452.
The information and content
of this website is intended
for UK consumers only
and is subject to the
UK regulatory regime.
The FSA do not regulate
will writing services
and some forms of mortgages
and tax planning services.
Honister Partners Ltd
Registered Office 1 Nicholas
Road, London W11 4AN.
Registered in England
and Wales no. 06923303. |
|
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Hedgelands Financial Services
Hedgelands
Abbotskerswell
Newton Abbot
Devon TQ12 5PW
map
Telephone:
0845 165 1280
01626 360654
General Insurance:
0845 165 1281
01626 336808
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