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For most people, your home is the largest single investment you will ever make, so making the wrong decision can become a very expensive mistake. Taking the wrong mortgage can end up costing thousands extra over the lifetime of the loan, and what appears to be the cheapest on day one will not always prove to be so over an extended period of time. Avoid costly mistakes by taking advice from Lincoln Financial Services.
A handy guide to Mortgages
Capital & Interest
This is the simplest type of mortgage. The payments you make to the lender every month pay off both the capital and the interest from the loan. Provided you keep up the payments, you are guaranteed to pay off the loan by the end of the term agreed (usually 25 years).
The lender calculates monthly repayments depending on the amount borrowed, how long for, the interest rate and how the rate is set.
The flexible mortgage is a relatively new type of mortgage to the UK. It has the facility for both over and underpayments, meaning you can overpay your mortgage when finances allow and then, providing you have made overpayments in the past, underpay when finances are tight. If you overpay but never make any withdrawals, you can save a significant amount of interest over the life of the loan
Interest only mortgages
An interest only mortgage is where the lender only charges you interest on the loan you’ve agreed. You don’t pay the capital back until the end of the mortgage. The lender will usually ask you to provide an investment plan to repay the loan at the end of the term, such as an endowment policy or ISA savings plan, but sometimes they will just leave it to you.
Every month, you then pay this interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon how the rate you have chosen is set. At the end of the loan period, the lender will expect the initial capital they lend you to be repaid in full by whatever means you have arranged.
If you are in your mid-50s or older, own your own home and want additional funds, then releasing the equity in your property through a lifetime mortgage may be a way of achieving this. There are various types of lifetime mortgage available and will generally involve taking out of a mortgage secured against the value of the home in order to provide a cash lump sum, regular income or both.
These schemes can be helpful but are not suitable for everyone. We can advise you on whether this could be a good option for you.
For help and advice on the right mortgage type for you,
give us a call on: 0800 587 4523
Lincoln Financial Services
01522 839 525
0800 587 4523
Lincoln Financial Services Ltd, registered as a limited company in England and Wales under company number: 06262121. Registered Company Address: Oak House, Waterside South, Lincoln, Lincolnshire LN5 7FB.