Mortgages

Question 1

What are the different types of mortgages?

Answer 1

• Offset.
• Equity release.
• Buy to let.

Question 2

Describe offset.

Answer 2

This is where the mortgage account and bank account are linked.

Question 3

Describe equity release.

Answer 3

Typically used by over 55’s where the equity in a property is mortgaged to release money tied up in the property for retirement.

Question 4

Describe Buy to let.

Answer 4

Mortgages taken out to specifically purchase a property to rent out.

Question 5

What is repayment mortgage?

Answer 5

Balance reduces each year until balance outstanding. Interest is charged daily on balance outstanding. Therefore as balance reduces, less interest is charged.

Question 6

What is interest only mortgage?

Answer 6

Balance stays the same throughout the term of the mortgage. Interest charged on balance outstanding. Balance is not reducing each year as only interest is paid. Will need a repayment vehicle to repay balance at the end of the term.

Question 7

Is repayment or interest only more cheaper each month?

Answer 7

Interest only is cheaper each month as only paying interest.

Question 8

Is repayment or interest only more expensive each month?

Answer 8

Repayment is more expensive each month to service as paying capital and interest.