Mortgages are long-term home loans taken out on personal residences. It is an extremely competitive area with hundreds of myriad providers dominating the market. Mortgages are generally the biggest single area of outlay for the traditional citizen. Not only will mortgages be their largest monthly outgoing, but also the overall price of the house will be the most expensive purchase of their lives.
The repayment terms of mortgages do vary, but most commonly run for twenty-five years. Interest is charged on all mortgages and the rate is linked heavily to the Bank of England's base rate. This is watched very closely by all consumers with large debt in this area, a small rise can have a big impact on a family's disposable monthly income. Until recently one of the most common forms of this product was an Endowment. This resulted in the customer paying monthly premiums into a policy, which, on maturity, would pay off the lump sum and accrued interest from the home loan. However, due to the recent slumps in stocks and shares, this is no longer a popular way to repay the debt.
The Repayment method is still the most popular form. The customer pays off the interest and a small amount of the capital sum each month, until the loan has been completely repaid. This is the most uncomplicated and safest method of repaying such a debt. If you are looking for variation, the newest and most in vogue form of repaying a home loan is called the Offset method. This rewards customers who hold large amounts of savings in their bank accounts. Any savings are set against the housing debt for interest calculations. This means that although not receiving any interest payments on their savings, Offset customers pay less interest on their loan and can often pay it off much faster than through the more common Repayment method.
All homes are at risk if repayments are not kept up to date however. If customers default on their payments then the providers have the option of selling the property and reclaiming any lost revenue on the house in this fashion.
