Hamiltons Estate Agency
East Kilbride

Do you need help or advice about getting a mortgage?

This page gives you an overview of some of the mortgages most commonly available and explains how they differ from each other.

What is a mortgage?

A mortgage is a long-term loan, usually secured on your home. 'Secured' means that, if you don't keep up the loan repayments, the lender can repossess your home and sell it to get its money back.

Remember: If you can't keep up your mortgage payments, you could lose your home. Don't overstretch your budget!

What sorts of mortgages are available?

Mortgages differ in the methods of repayment, the interest you pay and other features such as flexibility and cash incentives.

There are two basic ways to repay your mortgage - a repayment mortgage or an interest-only mortgage - and several different types of interest rates: fixed, discounted, capped, tracker or variable. The table below sets out the main types of interest rates and how they work. For more information on how to repay your mortgage and how to choose between a repayment mortgage and an interest-only mortgage, click here.

Other features

Some providers offer flexible features such as allowing overpayments and underpayments on certain conditions. Some offer cashback - a substantial cash sum (for example 3-5% of the amount borrowed) when you take up the loan. They may charge a higher interest rate in return for this cash sum.

Things to think about before choosing a mortgage.

How much you can afford. You should consider how much you can afford now and what you may be able to afford in the future. Typically, the maximum mortgage a lender offers is from three to three-and-a-half times the main earner's income, plus one times any second earner's income; or two-and-a-half times your joint income. Some lenders offer more, some less. Others base the amount they lend on an 'affordability' test. Don't borrow the maximum possible if it costs more than you feel you can afford each month.

Length of the mortgage term. Many mortgages are set up over 25 years but they can be for shorter or longer terms. Beware of making financial commitments that continue past the age that you intend to retire. When choosing a mortgage, think about the total amount you will pay over the years, as well as what you pay each month. With a shorter term, you will have higher overall monthly repayments but you will pay less in total as you won't pay so much interest.

The interest rate deal. Think carefully about any special deals as there can be strings attached. Check these points:

• If you can make lower payments for the first few months or years, you will then have to make higher payments later on?

• Often there is an early repayment charge if you pay off all, or part, of the mortgage during the period of a special deal. Does the early repayment charge also apply beyond the end of a special deal?

• Can you take the mortgage with you if you move?

• For a mortgage with cashback will you have to pay back some or all of this money if you repay all or part of your mortgage within the first few years?
  

Before you sign up.

• Check all the details about the mortgage with the provider or your mortgage adviser.

• When deciding on the best mortgage don't just look at the initial interest rate.

• Many mortgages offer incentives or other features that can affect the overall cost of the mortgage. Weigh up the features and incentives offered with the amount you have to pay each month.

• Consider how possible increases in interest rates may affect your monthly repayment.

• Think of the overall package and whether it's right for you.

Shop around

Whatever you're buying - cars, holidays, electrical goods - you probably look for a good deal by comparing products and prices from different shops or companies. Buying financial products and services shouldn't be any different. You can save yourself money and get a better deal by shopping around.

Courtesy of Financial Services Authority (http://www.fsa.gov.uk/)