residential
mortgage
Residential
mortgages
are
basically
the standard
older
mortgages
which have
been given a
new name.
This means
that a
residential
mortgage is
one of the
more
reliable,
more
flexible,
and more
innovative
mortgage
products
which often
find
solutions
for all
those people
for whom a
loan means
freedom from
a financial
constraint.
The interest
rates for
these
mortgages
are still
fairly low
compared to
other
mortgage
products
which
basically
means that
these
mortgages
are one of
the more
sought
after.
However, it
is not that
easy to find
a good
residential
mortgage. In
order to
achieve
this, the
borrower
must be
aware of
which
mortgage
product
would suit
their
circumstances
the best.
When they
know what
they want it
would be
easier to
look around
the market.
A
Residential
mortgage
offers
various
mortgage
products
although
this will
depend on
the rates of
interest.
The types of
residential
mortgage are
– capped,
fixed,
variable,
cash back,
discounted
and tracker.
A fixed
residential
mortgage
basically
has a fixed
rate of
interest for
a certain
length of
time. After
this period
the rate
will change
to a
variable
rate. With a
fixed
residential
mortgage the
borrower can
enjoy the
same
interest
rate even if
the rates of
interest
increase.
They will
have the
choice of
being able
to plan
their budget
in advance
because they
will be
clearly
aware of
their
monthly
outgoings.
However,
there is an
obvious
disadvantage
with these
mortgages
which is
that the
borrower
will not be
able to make
use of any
decreases in
the interest
rates.
With a
Variable
rate
residential
mortgages
the rate of
interest
will
increase and
decrease
according to
the market
changes with
the interest
rate. In
other words,
if the
mortgages
rate of
interest
decreases,
the borrower
will pay
less. On the
other hand,
if the
interest
rates
increase the
borrower
will pay
more. If the
mortgage
borrower is
unable to
afford to
pay the
higher rates
of interest,
then they
would be
more suited
to applying
for a fixed
rate
mortgage.
The Variable
rate would
either be
the mortgage
lender’s
variable
rate or a
general rate
such as the
Bank of
England’s
base rate.
Capped rate
residential
mortgages
link the
borrower to
a variable
rate of
interest,
however
there is a
limit to
which the
interest
rates can
increase.
This is
called the
cap rate or
the
‘ceiling’. A
residential
mortgage
like this
would stop
the borrower
from
receiving
any
significant
increases
within their
interest
rates.
Another
mortgage
which is on
a similar
line is that
of a cap and
collar
mortgage.
With these
mortgages
the interest
rate the
borrower
pays does
decrease
below a
certain
limit.
A
Residential
Mortgages
which has
discounted
rates means
that the
mortgage
repayments
are based on
the interest
rate which
is lower
than that of
a variable
rate for a
certain
length of
time. This
enables the
borrower to
have a lower
interest
rate
particularly
if they are
setting up a
new home.
Nevertheless,
if their
payments
increase
whilst they
are on a
discount the
actual
monthly
payments
will also
increase.
A mortgage
which can
replace the
discount
mortgages is
a cash back
mortgage.
With these
mortgages
the borrower
will receive
a lump sum
or cash back
depending on
the sum of
mortgage
they
receive. The
Monthly
payments
will be
linked to
that of a
variable
rate. These
forms of
residential
mortgage
could be a
very useful
part for
providing
cash when
the borrower
needs it. A
tracker
residential
mortgage
will link
the interest
rate to an
independent
rate such as
the Bank of
England’s
base rate.
The rate of
interest for
the mortgage
will
increase and
decrease
along with
this
independent
rate.
A Sub-prime
residential
mortgage is
one that is
designed for
borrowers
who do not
have a good
credit
rating. The
Non-conforming
residential
mortgages
known as
jumbo loans
surpass the
set loan
limit and
will let the
borrower
borrow more
money.
However,
they do have
a higher
rate of
interest
compared to
other
mortgages.
Due to the
prices of
houses
continually
increasing,
it is not
always
feasible for
everyone to
be able to
purchase a
house.
Council
tenants now
have the
opportunity
of
purchasing
their
council
house with a
new special
product
known as
“council
right to
buy”. A
First time
buyer’s
mortgage has
the
advantage of
letting
anyone
become a
homeowner.
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