If you’d have asked me this in 1987, I’d have looked you square in the eye and proclaimed: “endowment mortgage” as I pushed my quiff and mullet into place.
Many moons ago, endowment mortgages were all the rage, but they are now a distant memory for many of us. The principle was that you paid interest only which was linked to an endowment insurance policy which, after a certain length of time, would cover the capital repayment required.
There was one major flaw though – many in the 1990s fell short and some homeowners were left reeling by the shortfall which was never anticipated on taking out said endowment.
In 1995, with a number 1 shaved head, I’d have stated unequivocally: Capped Repayment Mortgage.
Since then there’s been other strange mortgage deals: pension mortgages, capped mortgages and the onset and death of cash back mortgages.
Now, however, in 2016, we are left with just three main choices, which are simpler to understand for both mortgage providers and house buyers:
- Fixed rate mortgages: as they say on the tin, these are fixed from say 1 year to 10 years; they’re great for people budgeting as interest rate rises leave the repayment unaffected. Though the reverse is the disadvantage – interest rate falls have no financial benefit for those on a fixed rate deal.
- Discount mortgages: these are effectively variable rate with a discount applied – they offer less certainty than a fixed rate mortgage but they can go down, as well as up.
- Tracker mortgages: these, like discount mortgages, are variable, but with a difference – they track the Bank of England base rate, so repayments only increase when the Old Lady of Threadneedle Street stirs her loins.
There’s obviously advantages with all three.
Having recently rightsized, downsized, call it what you will, we switched from a discount mortgage to a 2 year fixed with a high street giant to avoid future uncertainty.
So now, in 2016, as my hair recedes and greys daily, I’d say: if you’re looking for a mortgage, I’d advise you to contact an independent whole of market broker.
Do not be tempted, dear readers, to use that estate agency who will try to lure you into a mortgage deal with a commissioned broker, who 9 times out of 10, is not whole of market and where the higher costs (charged to you) pays the introduction or procurement fee.
We used an independent broker, friends of ours did the same, and I would wholeheartedly recommend this approach in finding a mortgage.
If you need any more advice on my hairstyles through the ages, just ask.