Our Mortgage or Secured Loan Service

 

Debt Solutions 4U works closely with an Independent Financial Adviser (IFA) who can search the whole of the market to obtain the best deal for you. We can also help with the following services.

 

Ø  Personal Loans

Ø  Pensions

Ø  Wills & Trusts

Ø  Insurance (Critical, Life, Accident & Sickness, Income Protection)

 

Re-Mortgages or Secured Loan

 

If an individual has a property which is worth more than the mortgage and any other debts secured against it, a proportion of the surplus (equity) can be released to raise a lump sum to settle the outstanding debts. The result is that all the unsecured debts are brought together in one debt secured against the property. As the interest rate is likely to be lower than credit cards, unsecured loans and overdrafts the monthly payment will be smaller than that paid in respect of these debts. However, the secured debt will be repaid over a longer period and as a result the amount being paid back could be more than was owed on the original debt.

There are three main ways to release the equity:

 

· Further borrowing from an existing mortgage lender

· Re-Mortgage to a new mortgage with a larger borrowed amount

· Keep the existing mortgage and obtain a new loan secured on the property

 

It is often simplest to try and obtain for further borrowing from an existing lender as they are already familiar with the individual. A re-valuation of the property may be required to ensure that there is sufficient equity to cover the further borrowing. Any joint owners of the property will have to agree to the increased borrowing.

 

A secured loan leaves the existing mortgage in place but allows borrowing against the equity. The interest rates tend to be higher than a re-mortgage or further borrowing as the term of the loan tends to be shorter and consequently a higher risk. A lender providing a secured loan will take a charge against the property known as a second charge.

 

The full value of the property will never be released whether further borrowing. Re-mortgage or a secured loan is obtained. The lenders will always leave some equity in the property in case the property decreased in value.

 

It should be noted however, that if the individual does not keep up with the re-payments then the property may be repossessed. It is necessary to ensure that the re-payments are affordable. The individual should ensure that they do not start building up other types of debt again for example credit cards, loans.

 

 

About mortgages

 

 

 

The different types of mortgage deals on the market can seem confusing. Here is a brief rundown of the main mortgage types available, based on the mortgage rate charged.

 

Fixed Rate mortgage

 

Fixed rate mortgages are offered at a specific rate of interest over a specific period of time meaning your mortgage payments will be the same each month over the period. This helps you budget and means you haven’t got to worry about interest rate changes resulting in your mortgage repayments going up. However you will not benefit from lower monthly payments when interest rates are lower. Fixed rate mortgages are most commonly offered for two, three and five-year periods although some lenders also offer 10 and 25-year terms. 

 

Standard Variable Rate (SVR) mortgage

 

The SVR is a mortgage lender’s default rate which usually follows the Bank of England base rate. (The rate of mortgage paid will be a few percent higher than the base rate.) It is important to check whether lenders' variable rates are higher or lower than their fixed rates. Once a fixed rate mortgage ends, if you do not (or cannot) remortgage then you will start paying interest based on the lender’s SVR, which may involve a jump or reduction in your mortgage repayments. It is important to be aware that lenders are not obliged to change their SVR when the Base Rate moves and neither may they move their SVR by the same percentage as the Base Rate or make immediate changes. As a result of these variables, a standard variable rate mortgage can change at any time and your budget planning needs to allow for this.

 

Discount rate mortgage

 

This is where the lender offers you a rate which is lower than its SVR for a given period, usually the first few years of the loan. After this the mortgage will switch back to the SVR. Discount rate mortgages are attractive as they offer you a saving in the early part of the mortgage – and as it is linked the lender’s SVR, your monthly payments should drop if the Bank of England Base Rate drops (assuming the lender passes on the rate cut!)

 

Capped rate mortgage

 

Capped rate mortgages are similar to SVR mortgages with the added advantage that the rate cannot rise above a certain level for a designated length of time. Capped mortgages therefore give (temporary) protection against rising rates but are typically more expensive than fixed rates, so should be chosen only if you feel interest rates are equally likely to rise. As with all mortgages, always read the fine print before proceeding.

 

Base rate tracker mortgage

 

This mortgage will track the Bank of England base rate. This can make advanced budgeting more difficult because your mortgage payments may change on a monthly basis but a tracker is a good bet in an environment of falling interest rates.

 

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Feel free to call us on               0191 454 0226        for a confidential discussion or send us a quick email.