Types of Mortgages
Mortgage – Different Types of Mortgage Loans and their Terms and Conditions
Generally a mortgage is a loan that allows someone to purchase a property and the property itself is the security for the loan. The company or the organization that provides persons with mortgage is called mortgagee and the person who takes a mortgage to buy a property is known as a mortgagor. Mortgages are different types and it depends upon certain terms and conditions.
The term mortgage is also used if the person who has a poor credit history borrows to purchase a property. A mortgage is also described as – bad credit mortgage, poor credit mortgage, non status mortgage, credit impaired mortgage, no credit mortgage and low credit score mortgage. Read about different types of insurance.
Here are some of the most common types of mortgages and their terms.
APR (Annual Percentage Rate)
The APR finances home buyers with the capacity to compare different types of mortgages based on the annual percentage rate of each mortgage. Here the interest rate reflects the cost of a mortgage as yearly rate.
This term refers to the fee that a buyer pays to his lender in return for financing with a mortgage. This type of mortgage is generally paid by completion or with the application when the mortgage is taken with a fixed rate or discount.
AST (Assured Short hold Tenancy)
It is a type of tenancy that gives the lender the right to acquire their property if the debt is not repaid within a period of time mentioned in the tenancy agreement.
AT (Assured Tenancy)
In this type, the lender has the right to charge a market rent (current rate of similar property in that particular area) and acquire back the property under certain terms and conditions as set out in the Housing Acts of 1988 and 1996.
It is a short term loan that enables to purchase property before the sale of another property. But before taking this type of mortgage, it is always wise to consult a mortgage adviser or a professional or else it could worsen the situation.
This is a fee charged by adviser or an intermediary from the borrower for recommending and locating the most appropriate mortgage.
Buy To Let
This type of mortgage is meant for those who want to purchase property to rent out. The repayment of this mortgage is usually based upon the future rental income of the property rather than the personal income of the borrower.
The lender can claim upon a leasehold or freehold property if the loan or the mortgage is not repaid.
In this type of mortgage, the borrower and the lender make certain terms and conditions through their respective solicitors to buy a property. Usually, the borrower has to deposit an amount of 10% in order to become the legal owner of the property.
This is a legal process where the sole authority of the property is transferred from the seller to the purchaser and is usually undertaken by solicitor and licensed conveyance.
Early Redemption Fee
In order to redeem a mortgage early, the borrower can sell a property or remortgage it.
Equity And Negative Equity
This refers to the amount of value in a property that is not covered by a mortgage. Here the money owes by the borrower is greater than the value of the property.
Exchange Of Contracts
The borrower and the lender are signed in to contracts with certain terms and conditions. With the exchanges of contracts the deal becomes legal.
Here a mortgage has a certain set rate of interest for a particular period of time and the rate of interest varies from lender to lender.
Interest Only Mortgage
In this type of mortgage, the borrower has to pay an interest on the amount borrowed for purchasing a property during the mortgage term. Here the borrower is responsible to repay the complete mortgage at the end of the term.
A mortgage that is arranged on behalf of mortgage broker or adviser after finding the mortgage most suitable for the borrower.