The initial target market for this type of home loan product was people who have irregular working patters such as the self-employed, and people who receive irregular payments such as bonuses and commissions. Typical features include, overpayments, underpayments, drawdown of overpayments made, additional borrowing facilities, and no (or low) redemption penalties.
In addition to the features that allow for flexibility with payments, the interest on flexible mortgages is calculated on a daily basis. This can result in massive savings to the borrower and can significantly reduce the term of the loan. This is particularly the case when borrowers deposit all of their incomes into the loan immediately when they receive them. This ensures that they save as much interest as possible during the life of the mortgage.
For this reason flexible home loans have become popular with people in all types of employment who are looking to pay off their home sooner. While the initial target market may have been the self-employed, people from all walks of life are now reaping the benefits from this new type of home loan product.
Interest rates are generally higher on flexible mortgages than for traditional products to counter the increased risk of the borrower not repaying the full balance of the loan by the end of the term. The flexibility of this type of home loan product allows for this to happen. Some products can also be linked with current accounts, chequebook facilities, debit and credit cards, unsecured loans, and offset accounts.
One popular type of flexible home loan is the offset mortgage. This type of product will offset any positive balance of funds in a bank account held with the same lender, in order to reduce the amount of interest payable. Borrowers should be aware, however, that the interest earned on savings in the deposit account will be liable for income tax.
Another type of flexible mortgage that has become popular in recent years is the current account product. Flexible home loans of this type combine the loan with a current account and credit card facility in order to streamline the borrower’s banking facilities. Products of this type are sometimes referred to as a “line of credit”. Borrowers can draw down on the line of credit for any purpose making it a popular choice for people who are renovating their homes.
Sunday, October 19, 2008
All About Variable Rate Mortgages
Variable rate mortgages have an interest rate that may fluctuate throughout the term of the loan. Interest rates attached to variable rate mortgages usually move in line with either the Bank of England Base Rate (BoEBR) or the lender’s Standard Variable Rate (SVR) and is quoted as a fixed percentage above one of them. An example of this is a variable rate home loan with an interest rate equalling BoEBR plus 0.25%.
Fixed rate mortgages, on the other hand, have a static rate of interest that is locked in for an agreed period of time. Changes in the base rate or the lenders SVR will not affect the interest rate attached to this type of home loan making this type of product less risky to the borrower as their monthly mortgage payments will not increase
Capped rate mortgages have an inbuilt upper limit above which the interest rate on the product cannot rise even if the base rate rises above this limit. Capped rate mortgages therefore offer the borrower protection against excessive base rate rises while still offering the advantage of saving money through potential decreases in the base rate.
Unlike fixed rate mortgages, variable rate mortgages offer borrowers no protection against interest rate rises and are therefore risky. The amount of monthly repayments due can both rise and fall throughout the term of the mortgage therefore making variable rate mortgages unsuitable for householders who have a tight budget.
Despite this risk, variable rate mortgages do have some advantages. During periods of traditionally high interest rates many borrowers opt for variable rate mortgages if they are expecting the cost of borrowing to fall. This is because any fall in the underlying interest rate will be passed onto them by their lender, resulting in a decrease in their monthly mortgage payments.
Additionally, variable rate mortgages have less stringent terms and conditions than their fixed rate counterparts, and are usually offered with low fees and no tie-in periods. It is essential to assess the fees and charges attached to home loans before applying instead of opting for the product that appears to have the most favourable interest rate structure. This is because the cost of the fees may outweigh the benefits of the interest rates – whether they are fixed or variable.
Fixed rate mortgages, on the other hand, have a static rate of interest that is locked in for an agreed period of time. Changes in the base rate or the lenders SVR will not affect the interest rate attached to this type of home loan making this type of product less risky to the borrower as their monthly mortgage payments will not increase
Capped rate mortgages have an inbuilt upper limit above which the interest rate on the product cannot rise even if the base rate rises above this limit. Capped rate mortgages therefore offer the borrower protection against excessive base rate rises while still offering the advantage of saving money through potential decreases in the base rate.
Unlike fixed rate mortgages, variable rate mortgages offer borrowers no protection against interest rate rises and are therefore risky. The amount of monthly repayments due can both rise and fall throughout the term of the mortgage therefore making variable rate mortgages unsuitable for householders who have a tight budget.
Despite this risk, variable rate mortgages do have some advantages. During periods of traditionally high interest rates many borrowers opt for variable rate mortgages if they are expecting the cost of borrowing to fall. This is because any fall in the underlying interest rate will be passed onto them by their lender, resulting in a decrease in their monthly mortgage payments.
Additionally, variable rate mortgages have less stringent terms and conditions than their fixed rate counterparts, and are usually offered with low fees and no tie-in periods. It is essential to assess the fees and charges attached to home loans before applying instead of opting for the product that appears to have the most favourable interest rate structure. This is because the cost of the fees may outweigh the benefits of the interest rates – whether they are fixed or variable.
Mortgage Protection Insurance Cover Is Not Suitable For All Individuals, So Make Sure It Is Right For You
One sure way of getting access to all the information needed to make an informed decision is to get quotes from independent providers. Ethical providers will ensure that the information needed is available to those wishing to purchase cover. The exclusions in a policy vary depending on the provider, but there are some that are often seen in policies. Being of retirement age, suffering a pre-existing medical condition, being self-employed or working only on a part-time basis could mean mortgage cover is not suitable.
While exclusions do exist, even these depend on certain circumstances. For instance, as long as you have not suffered from the illness within the last two years you would be able to claim. The same goes for those individuals who are self-employed and through involuntary unemployment find they have to stop trading. These are just two reasons why going over the terms and conditions with a fine toothcomb is essential.
Those individuals who could benefit from a policy would have peace of mind and the security of an income each month. Being unfit for work due to an accident or illness or becoming unemployed through being made redundant are all covered by mortgage payment cover. Providers offer a policy that will protect your monthly mortgage repayments and allow you to continue meeting them for a premium each month. The premiums will be based on your age when applying and the amount of your monthly mortgage repayments. The tax-free income gained from the premium would begin between 30 to 90 days of being unable to work and would continue for 12 to 24 months, depending on the terms of the policy.
In the past mortgage insurance, along with the family of payment protection policies, has been seen as being poor value for money. The premiums charged for the luxury of having protection can be extremely high. Shopping around will reveal the difference between quotes: it can be as much as 40% when you compare the high street lenders with the best specialist providers. This difference also exists when it comes to getting the information needed to compare protection. Some give very little information, while specialists will give you all the details needed.
While exclusions do exist, even these depend on certain circumstances. For instance, as long as you have not suffered from the illness within the last two years you would be able to claim. The same goes for those individuals who are self-employed and through involuntary unemployment find they have to stop trading. These are just two reasons why going over the terms and conditions with a fine toothcomb is essential.
Those individuals who could benefit from a policy would have peace of mind and the security of an income each month. Being unfit for work due to an accident or illness or becoming unemployed through being made redundant are all covered by mortgage payment cover. Providers offer a policy that will protect your monthly mortgage repayments and allow you to continue meeting them for a premium each month. The premiums will be based on your age when applying and the amount of your monthly mortgage repayments. The tax-free income gained from the premium would begin between 30 to 90 days of being unable to work and would continue for 12 to 24 months, depending on the terms of the policy.
In the past mortgage insurance, along with the family of payment protection policies, has been seen as being poor value for money. The premiums charged for the luxury of having protection can be extremely high. Shopping around will reveal the difference between quotes: it can be as much as 40% when you compare the high street lenders with the best specialist providers. This difference also exists when it comes to getting the information needed to compare protection. Some give very little information, while specialists will give you all the details needed.
Be Wary Of Where You Buy Your Mortgage Payment Protection Insurance
Homeowners who rely on the state stepping in and providing an income could be in for a shock. In order to be able to get help you have to fit certain criteria, and this usually means you have to be claiming income support. Even if you do receive help, the state support provided only goes towards the interest part of your mortgage. In the majority of cases you could also be waiting a long period before seeing any money. If you want peace of mind and security, and providing a policy is suitable, then taking out a protection policy to cover your mortgage payments could be a better choice.
Cover can be expensive depending on where you choose to take out a policy. Mortgage protection is offered when taking out the loan at the time of borrowing but this is not the only option you have. You can make the choice to buy a policy independently, from a standalone provider. Buying cover for your mortgage this way can save you around 40% in comparison to the quote offered by the high street lender. It is also important to realise that the borrowing is not dependent on you taking the cover a high street lender offers. While some lenders might ask that you protect the money you are borrowing, you do have the option of choosing who to take that protection with.
A policy that is bought from an independent specialist provider would kick in after the policy holder had been unable to work for between 30 to 90 days. It would then continue to provide you with a tax-free income for between 12 to 24 months. However, a policy is not suitable for all. There are circumstances that could mean the protection would not be suitable. For example, if you only work in a part-time position as opposed to full time you would not be eligible. In addition, if you are retired, suffer from an ongoing illness or work for yourself then a policy might not be suitable. These are just some of the exclusions that can frequently be found in mortgage insurance cover and providers can add in others. This means that checking the terms and conditions of a policy is essential before taking out the policy.
An ethical specialist will make you fully aware that certain conditions exist. They will show you in plain English what you will get out of their mortgage payment protection insurance policy, while also making you aware of how much the cover would cost in total. The premium quoted will be based on your age and the amount of your monthly mortgage repayments. High street lenders sometimes work out how much the insurance would cost and then add it onto the cost of the loan, and then add interest onto the whole amount. An independent provider will not only help you to make savings, but will also give you the vital information needed to make an informed decision regarding suitability.
Cover can be expensive depending on where you choose to take out a policy. Mortgage protection is offered when taking out the loan at the time of borrowing but this is not the only option you have. You can make the choice to buy a policy independently, from a standalone provider. Buying cover for your mortgage this way can save you around 40% in comparison to the quote offered by the high street lender. It is also important to realise that the borrowing is not dependent on you taking the cover a high street lender offers. While some lenders might ask that you protect the money you are borrowing, you do have the option of choosing who to take that protection with.
A policy that is bought from an independent specialist provider would kick in after the policy holder had been unable to work for between 30 to 90 days. It would then continue to provide you with a tax-free income for between 12 to 24 months. However, a policy is not suitable for all. There are circumstances that could mean the protection would not be suitable. For example, if you only work in a part-time position as opposed to full time you would not be eligible. In addition, if you are retired, suffer from an ongoing illness or work for yourself then a policy might not be suitable. These are just some of the exclusions that can frequently be found in mortgage insurance cover and providers can add in others. This means that checking the terms and conditions of a policy is essential before taking out the policy.
An ethical specialist will make you fully aware that certain conditions exist. They will show you in plain English what you will get out of their mortgage payment protection insurance policy, while also making you aware of how much the cover would cost in total. The premium quoted will be based on your age and the amount of your monthly mortgage repayments. High street lenders sometimes work out how much the insurance would cost and then add it onto the cost of the loan, and then add interest onto the whole amount. An independent provider will not only help you to make savings, but will also give you the vital information needed to make an informed decision regarding suitability.
Mortgage Protection Cover Still Complicated When It Comes To Buying
Some of the most frequently seen exclusions include if you only work part time, suffer from a pre-existing medical condition, are self-employed or have retired. However, these exclusions are not cut and dry. For example, if the individual has not had a re-occurrence of the illness within the last two years it could be worthwhile talking out a policy. With these exclusions in mind it is essential that you go over the terms and conditions of any cover you are thinking of taking.
When taken out with your circumstances in mind mortgage insurance can give a monthly tax-free income. This money would allow you to continue meeting the repayments of the mortgage without having to worry about where to find the money. If you should become unable to work due to suffering an accident or illness this means you could concentrate on regaining your health and getting back to work. If you should be unfortunate enough to become unemployed, such as through redundancy, then you would have the time you need to search for a new job.
The safest way to make sure you get access to the vital information needed to make sure a policy is suitable is to go with a specialist provider. Such a provider sells cover independently as opposed to alongside the mortgage. They know the products they sell and never put huge profits ahead of the consumer. Not only can you benefit from the knowledge they have, but the premiums for mortgage protection with a standalone provider will save you around 40% in comparison to some high street lenders.
Policies do vary but usually they last for between 12 to 24 months once a claim is made, if you should remain unfit for work. There is a waiting period during which you have to be unable to work and this is anywhere from day 30 to 90. Premiums for the cover are based on how much your monthly mortgage is and your age when applying. An independent provider will ensure that you understand how much cover will cost in full and provide you with the key facts before you choose which policy is suitable.
Some homeowners are under the impression that they would automatically be entitled to receive help from the state, but this is not the case. Individuals have to qualify to receive any benefit from the state. Those who have a partner who works in a full-time position or who have savings in the bank of more than £8,000 would not be entitled to receive state support. And those who do manage to qualify could have a long wait on their hands if they took their mortgage out after 1995. In fact, they would have to wait nine months and then they would only be able to claim for the interest part of their mortgage for up to £100,000.
When it comes to buying mortgage protection cover it can still be hard to understand the exact nature of the cover, depending on where you buy your policy. Despite guidelines being set out by the Financial Services Authority many providers are still not giving adequate information at the time of selling the product. This is leaving many consumers unaware of the exclusions that exist in their cover, which can stop them from being eligible to claim.
When taken out with your circumstances in mind mortgage insurance can give a monthly tax-free income. This money would allow you to continue meeting the repayments of the mortgage without having to worry about where to find the money. If you should become unable to work due to suffering an accident or illness this means you could concentrate on regaining your health and getting back to work. If you should be unfortunate enough to become unemployed, such as through redundancy, then you would have the time you need to search for a new job.
The safest way to make sure you get access to the vital information needed to make sure a policy is suitable is to go with a specialist provider. Such a provider sells cover independently as opposed to alongside the mortgage. They know the products they sell and never put huge profits ahead of the consumer. Not only can you benefit from the knowledge they have, but the premiums for mortgage protection with a standalone provider will save you around 40% in comparison to some high street lenders.
Policies do vary but usually they last for between 12 to 24 months once a claim is made, if you should remain unfit for work. There is a waiting period during which you have to be unable to work and this is anywhere from day 30 to 90. Premiums for the cover are based on how much your monthly mortgage is and your age when applying. An independent provider will ensure that you understand how much cover will cost in full and provide you with the key facts before you choose which policy is suitable.
Some homeowners are under the impression that they would automatically be entitled to receive help from the state, but this is not the case. Individuals have to qualify to receive any benefit from the state. Those who have a partner who works in a full-time position or who have savings in the bank of more than £8,000 would not be entitled to receive state support. And those who do manage to qualify could have a long wait on their hands if they took their mortgage out after 1995. In fact, they would have to wait nine months and then they would only be able to claim for the interest part of their mortgage for up to £100,000.
When it comes to buying mortgage protection cover it can still be hard to understand the exact nature of the cover, depending on where you buy your policy. Despite guidelines being set out by the Financial Services Authority many providers are still not giving adequate information at the time of selling the product. This is leaving many consumers unaware of the exclusions that exist in their cover, which can stop them from being eligible to claim.
Would You Benefit From Taking Out Mortgage Insurance?
While providers of mortgage protection can add in their own exclusions there are some that are common to most policies. Individuals who are self-employed, retired, have a pre-existing medical condition or who are not working in a full-time position could find cover would be useless. This is not black and white; for example, self-employed individuals who had to ceased trading altogether through involuntary unemployment could still benefit from a policy. And those who have an illness that has not reared its head during the last two years could also benefit. It is essential to carefully check the policy details to make sure an exclusion would not apply to you.
After taking out suitable cover the policy holder would have peace of mind if they lost their income through sickness, accident or unemployment. Their policy would provide a tax-free income once they had been incapable of working for between 30 to 90 days. The money received would cover the monthly repayments for the mortgage and related outgoings such as insurance.
While the high street lender may get the best deal for the mortgage this does not mean they can do the same for the protection for the mortgage. In fact, buying mortgage cover alongside the borrowing is often the most expensive way of doing so and the most risky. Often very little information is given regarding the terms and exclusions that come with a policy. This means the consumer is unaware of the exclusions and could be buying a very high-priced policy that they cannot claim against if they find themselves out of work.
Some lenders might ask that you do take out some form of protection for the money you are borrowing but it does not have to be taken at the same time. Consumers do have the right to shop around for a policy and your mortgage should not depend on taking the cover offered by the lender. By choosing to shop around for the cover you can make huge savings on the total amount you pay. A specialist lender will give an instant quote for mortgage protection based on the amount you wish to cover and age of the policy holder. Along with this, they provide all the information needed for the consumer to be able to choose whether a policy would be suitable
Those individuals who think they could rely on the state helping out in their time of need could be in for a disappointment. While the state does offer help, you have to qualify for it. The help the state provides depends on how much money you have in savings; having over £8,000 means you would be expected to use this money to support yourself. Also, if you have a partner living with you who is in full-time work then you also would not be eligible for help, and the help that is given will only pay towards the interest part of the first £100,000 of your mortgage. So a far better solution to relying on the state is to take out mortgage insurance from an independent provider.
After taking out suitable cover the policy holder would have peace of mind if they lost their income through sickness, accident or unemployment. Their policy would provide a tax-free income once they had been incapable of working for between 30 to 90 days. The money received would cover the monthly repayments for the mortgage and related outgoings such as insurance.
While the high street lender may get the best deal for the mortgage this does not mean they can do the same for the protection for the mortgage. In fact, buying mortgage cover alongside the borrowing is often the most expensive way of doing so and the most risky. Often very little information is given regarding the terms and exclusions that come with a policy. This means the consumer is unaware of the exclusions and could be buying a very high-priced policy that they cannot claim against if they find themselves out of work.
Some lenders might ask that you do take out some form of protection for the money you are borrowing but it does not have to be taken at the same time. Consumers do have the right to shop around for a policy and your mortgage should not depend on taking the cover offered by the lender. By choosing to shop around for the cover you can make huge savings on the total amount you pay. A specialist lender will give an instant quote for mortgage protection based on the amount you wish to cover and age of the policy holder. Along with this, they provide all the information needed for the consumer to be able to choose whether a policy would be suitable
Those individuals who think they could rely on the state helping out in their time of need could be in for a disappointment. While the state does offer help, you have to qualify for it. The help the state provides depends on how much money you have in savings; having over £8,000 means you would be expected to use this money to support yourself. Also, if you have a partner living with you who is in full-time work then you also would not be eligible for help, and the help that is given will only pay towards the interest part of the first £100,000 of your mortgage. So a far better solution to relying on the state is to take out mortgage insurance from an independent provider.
Mortgage Protection Can Take Over Where The State Fails
Individuals who rely on State support if they lose their income could be at risk of losing the roof over their heads. While some help towards the interest part of the mortgage can be available, you do have to qualify and having more than £8,000 in the bank or a working partner could mean you lose out. Mortgage protection can take over where the State fails, providing you choose the correct policy that will pay out in your circumstances.
While you do have to qualify for mortgage cover it does give far better protection for those who lose their income. The main exclusions include being of retirement age, suffering from a pre-existing medical condition, only working part time or being self-employed. The provider can also include other exclusions so you have to read the terms and conditions thoroughly before taking out the cover. However, suffering from a pre-existing medical condition does not necessarily stop you from claiming. Providing the illness has not bothered you during the last two years you could still be eligible.
After finding the cheapest quote and comparing the terms and conditions you can sign up for a policy. The policy would start to pay out once the individual had been out of work for between 30 to 90 days. The policy would then carry on giving the payout for as long as 24 months with some providers, but it can be only 12 months with others. Again, the terms have to be checked.
Once you have decided that a payment protection policy is suitable you then have to find the cheapest possible quotes. Taking a policy that is offered alongside the borrowing is usually the most expensive option. The cheapest quotes will usually be found with standalone providers and along with this they also offer all the information needed to be able to decide if protection is right for your circumstances. The very best providers can help you to save as much as 40% when compared to the high street lender. Quotes that providers give are based on the amount you wish to cover each month and age when applying, and you usually pay for the policy through monthly premiums.
While you do have to qualify for mortgage cover it does give far better protection for those who lose their income. The main exclusions include being of retirement age, suffering from a pre-existing medical condition, only working part time or being self-employed. The provider can also include other exclusions so you have to read the terms and conditions thoroughly before taking out the cover. However, suffering from a pre-existing medical condition does not necessarily stop you from claiming. Providing the illness has not bothered you during the last two years you could still be eligible.
After finding the cheapest quote and comparing the terms and conditions you can sign up for a policy. The policy would start to pay out once the individual had been out of work for between 30 to 90 days. The policy would then carry on giving the payout for as long as 24 months with some providers, but it can be only 12 months with others. Again, the terms have to be checked.
Once you have decided that a payment protection policy is suitable you then have to find the cheapest possible quotes. Taking a policy that is offered alongside the borrowing is usually the most expensive option. The cheapest quotes will usually be found with standalone providers and along with this they also offer all the information needed to be able to decide if protection is right for your circumstances. The very best providers can help you to save as much as 40% when compared to the high street lender. Quotes that providers give are based on the amount you wish to cover each month and age when applying, and you usually pay for the policy through monthly premiums.
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