Additional financial solutions for mortgages

Mortgage providers also have additional flexible options to suit the needs of clients today. These include the cash-back mortgage, the offset mortgage, guarantor mortgages, Let-to-Buy mortgages, overpayments, repayment holidays and lifetime mortgages.

Cash-back mortgage

This offers you lump sum cash back at the start of your mortgage, which you can use for expenses you may have. You’ll normally receive 5%-6% of your mortgage.

There are often high early repayment charges in place for a far longer period than most other types of mortgage.

Offset mortgage

These use savings accounts and current account balances to reduce the amount of interest you pay on your mortgage, thus reducing the length of the mortgage term. These are ideal for high earners or those who are able to maintain a good bank balance during the majority of the month. A variant of this type of mortgage is the all-in-one account, where your credit balances, salary and mortgage are all held together in one account.

Guarantor mortgage

Typically these exist for clients struggling to meet the income multipliers required for a mortgage. Some lenders will allow a guarantor (such as a parent) to be added to ensure that the mortgage loan is secured. This is until such time that the client generates a sufficient income to meet the mortgage requirements themselves.

Let-to-Buy mortgages

If you need to move into your new home before selling your old one this may be a good solution. This is how many first-time landlords are created. Should you find a buyer in the future you then have the option to sell your house.

Overpayments

Most types of mortgages these days allow a client to make overpayments, typically up to 10% of the balance per year, while some allow much higher levels of overpayment. If this situation is expected in the near future, careful selection of your mortgage type is vital to ensure you avoid unnecessary charges.

Repayment holidays

Some lenders allow you to take a break from repaying your mortgage. However, this is normally only permitted if a series of overpayments have been made in the first place. Examples of such repayment holidays include the arrival of a new born baby or other short-term changes in your situation.

Lifetime mortgages

The lifetime mortgage is useful when income or savings are limited during your retirement. You may be able to free up the capital tied up in the value of your home. Up to 50% of the value can be released depending on your age. No repayments are made to this type of loan. The interest is calculated and repaid either when you sell and downsize to a smaller home, or when you go into sheltered accommodation, long-term care or on your eventual death.

The advantages of lifetime mortgages are: the provision of the initial cash lump sum; a possible reduction in future inheritance tax; and if required a guarantee that the debt will never exceed the value of your home on completion. These types of mortgages are often inflexible and have high early repayment charges. You should be aware that if these are taken out at a relatively young age, or you live a long life, the interest repayments may be very high.

Where does that leave you?

The mortgage market is complicated and can be confusing. We are here to help you navigate your way through the process. After one of our free consultations, we will be able to advise you on the most suitable mortgage for your current situation, calculate how much you can afford to borrow and advise what your monthly mortgage payments will be, together with any associated mortgage fees. Your adviser will even help you with the paperwork to ensure that the whole process is painless and hassle free.

If you’d like any further information, or you’d like to talk things over with a mortgage adviser, please get in touch on 07789 900359.

“I didn’t think I would ever get on the mortgage ladder but Angela at Penda came up with a radical plan and now I have my first home.” Ms Singleton, Wallsend

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Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.