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Mortgages
As more and more people now choose to buy their homes, competition has been created within the mortgage provider market. Now there are so many varying methods of repayment that it may be hard to see which option is for you, and that's where we come in.
Avidity Wealth Management know that this is probably the biggest investment and financial transaction that you will ever make, so it's important to seek informed advice to ensure that you get a mortgage that is right for you - after all, if you don't keep up your payments then there is a risk that you may lose your home all together.
Here is a basic guide to inform you of some of the options available to you, and please feel free to contact us to discus these options and others that are available:
Repayment mortgage
What is it? With this mortgage, a lump sum is borrowed over a fixed period of time and the interest and capital broken down into a monthly repayment to the lender.
Advantages: At the end of the mortgage term, the loan is guaranteed to be repaid. Only if you miss payments is this extended.
Disadvantages: In the early years, the main part of the repayments are made up of interest, so it may take time to begin to pay off the capital.
Interest-only mortgage
What is it? In an interest-only loan, each monthly payment is made up of the interest owed to the lender, and this must be fully paid by the end of the agreed period. This mortgage would usually be used for a second home, and sold to pay off the remaining balance.
Advantages: If you re-mortgage or move, this loan can usually be taken with you.
Disadvantages: There is no guarantee that the sale of the property will pay off the remaining balance, and payments only cover the interest not the capital repayments.
Endowment mortgage
What is it? This is a way in which you can combine an interest-only mortgage with a saving scheme, as two payments are made each month; one to pay the interest, and the other to go into a savings account with an insurance company. The latter of which is invested and at the end of the period, this money is used to repay the outstanding mortgage balance.
Advantages: Flexible and portable, so if you move you can take the policy with you. This can also be combined with other life assurance policies and make them more affordable. Also, if you accumulate more money than the policy is worth, then you are able to take that as savings.
Disadvantages: Because they are tied to the stock market, there is a chance that the endowment policy may not build up enough funds to repay the loan.
Individual Savings Account (ISA)
What is it? Much like an endowment mortgage, the monthly repayments go towards the interest and also invest in an ISA, which allows you to invest in cash stocks and shares. This money is then built up to repay the outstanding mortgage balance.
Advantages: The capital gains tax advantages that come with an ISA mean that money could be built up quicker, especially if investments in stocks and shares perform well. Also very flexible.
Disadvantages: Because they are tied to the stock market, there is a chance the ISA policy may not build up enough funds to repay the loan. Also, there is a restriction on the amount of money that you can accumulate in an ISA within a tax year.
Pension Mortgage
What is it? A pension scheme and a mortgage rolled into one. Much like an endowment policy, two payments are made each month; one to the lender and another into a pension plan. The pension provides a savings account to both pay off the mortgage and provide an income in retirement. The loan is repaid out of the tax free cash and the maximum tax free cash that can be taken is 25%.
Advantages: The main advantage is that the contributions made to the pension plan have tax relief associated to them.
Disadvantages: Payment takes place at retirement in the form of a tax-free lump sum and used to pay the mortgage loan. If you don't save enough money then you may not have enough to live on in retirement, and possibly not enough to pay the mortgage. Also, if you take the money from a pension plan it is tax free, but this means that it reduces the amount of income that can be purchased.
This information does not contain all of the details that you need to choose a mortgage. Make sure that you read the separate key facts illustration before you make a decision.
You may have to pay an early repayment charge to your existing lender if you remortgage.
We do not normally charge a fee as we are usually paid by the lender. However, you have the option to pay us a fee and receive any commission which we are paid by the lender. If you choose this option, we estimate that the fee will be 0.5% of the mortgage amount.
Your home may be repossessed if you do not keep up repayments on your mortgage.
As more and more people now choose to buy their homes, competition has been created within the mortgage provider market. Now there are so many varying methods of repayment that it may be hard to see which option is for you, and that's where we come in.
Avidity Wealth Management know that this is probably the biggest investment and financial transaction that you will ever make, so it's important to seek informed advice to ensure that you get a mortgage that is right for you - after all, if you don't keep up your payments then there is a risk that you may lose your home all together.
Here is a basic guide to inform you of some of the options available to you, and please feel free to contact us to discus these options and others that are available:
Repayment mortgage
What is it? With this mortgage, a lump sum is borrowed over a fixed period of time and the interest and capital broken down into a monthly repayment to the lender.
Advantages: At the end of the mortgage term, the loan is guaranteed to be repaid. Only if you miss payments is this extended.
Disadvantages: In the early years, the main part of the repayments are made up of interest, so it may take time to begin to pay off the capital.
Interest-only mortgage
What is it? In an interest-only loan, each monthly payment is made up of the interest owed to the lender, and this must be fully paid by the end of the agreed period. This mortgage would usually be used for a second home, and sold to pay off the remaining balance.
Advantages: If you re-mortgage or move, this loan can usually be taken with you.
Disadvantages: There is no guarantee that the sale of the property will pay off the remaining balance, and payments only cover the interest not the capital repayments.
Endowment mortgage
What is it? This is a way in which you can combine an interest-only mortgage with a saving scheme, as two payments are made each month; one to pay the interest, and the other to go into a savings account with an insurance company. The latter of which is invested and at the end of the period, this money is used to repay the outstanding mortgage balance.
Advantages: Flexible and portable, so if you move you can take the policy with you. This can also be combined with other life assurance policies and make them more affordable. Also, if you accumulate more money than the policy is worth, then you are able to take that as savings.
Disadvantages: Because they are tied to the stock market, there is a chance that the endowment policy may not build up enough funds to repay the loan.
Individual Savings Account (ISA)
What is it? Much like an endowment mortgage, the monthly repayments go towards the interest and also invest in an ISA, which allows you to invest in cash stocks and shares. This money is then built up to repay the outstanding mortgage balance.
Advantages: The capital gains tax advantages that come with an ISA mean that money could be built up quicker, especially if investments in stocks and shares perform well. Also very flexible.
Disadvantages: Because they are tied to the stock market, there is a chance the ISA policy may not build up enough funds to repay the loan. Also, there is a restriction on the amount of money that you can accumulate in an ISA within a tax year.
Pension Mortgage
What is it? A pension scheme and a mortgage rolled into one. Much like an endowment policy, two payments are made each month; one to the lender and another into a pension plan. The pension provides a savings account to both pay off the mortgage and provide an income in retirement. The loan is repaid out of the tax free cash and the maximum tax free cash that can be taken is 25%.
Advantages: The main advantage is that the contributions made to the pension plan have tax relief associated to them.
Disadvantages: Payment takes place at retirement in the form of a tax-free lump sum and used to pay the mortgage loan. If you don't save enough money then you may not have enough to live on in retirement, and possibly not enough to pay the mortgage. Also, if you take the money from a pension plan it is tax free, but this means that it reduces the amount of income that can be purchased.
This information does not contain all of the details that you need to choose a mortgage. Make sure that you read the separate key facts illustration before you make a decision.
You may have to pay an early repayment charge to your existing lender if you remortgage.
We do not normally charge a fee as we are usually paid by the lender. However, you have the option to pay us a fee and receive any commission which we are paid by the lender. If you choose this option, we estimate that the fee will be 0.5% of the mortgage amount.
Your home may be repossessed if you do not keep up repayments on your mortgage.