Types of Non Conventional Mortgages Available in UK
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1. Current Account mortgage. This type of mortgage is becoming increasingly
popular. It works on the principle that your mortgage is held in the same bank
account as your ordinary current account. If you have an influx of money into
your current account it automatically reduces the size of your mortgage.
Therefore you will be pay a lower interest rate. This is beneficial because the
interest on mortgage payments is likely to be higher than the interest paid from
a current account. A reason why people may dislike this type of mortgage is that
it is intimidating to have such a big overdraft.
2. Flexible Mortgages. Flexible mortgages allow people to pay variable
amounts of monthly repayments. This is good for people who are self employed and
have variable income patterns. However it does require discipline to pay more
than the average monthly income. It could save money in the long run if it is
used to pay off the mortgage early
3. Cash back mortgage. A cash back mortgage is similar to equity withdrawal.
The main idea is that a mortgage is used to borrow cash against the value of the
house. With a cashback mortgage a borrower takes out more equity than he needs
to buy the house. This type of borrowing may be cheaper than borrowing on credit
4. Self – Certification Mortgages. A self certification mortgage is used
where a borrower is not able to easily prove his income. In a conventional
mortgage typically a lender is willing to lend a certain multiple of a person’s
income like 3 or 4 times. A self certification mortgage is sometimes used when a
borrower wishes to borrow much more than his provable income. However self
certification mortgages are becoming more regulated in recent years.
5. Offset Mortgage. An offset mortgage is very similar to a current account
mortgage. Money from one account is used to offset the mortgage balance. However
the difference is that the money is in different accounts.
There is an increasing array of non conventional mortgages on the market.
Increasingly, even mainstream lenders, are not sticking to conventional rules
about borrowing. The choice of mortgages is often overwhelmingly; this is
because often mortgages are combined e.g semi fixed mortgages combined with a
current account mortgage.
About the Author
R.Pettinger is an Economics teacher at Oxford and writes
frequently on the UK economy and mortgages. He edits a site about
Mortgages including a guide to different types of mortgages.
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Article Published/Sorted/Amended on Scopulus 2007-04-20 08:22:53 in Business Articles