Mortgages Types Explained
The Mortgage Term
The term of the mortgage is normally 25 years, but you can choose to repay your loan over a shorter or longer period. It is recommended to repay your loan before retirement.
There will usually be a range of mortgage loan products; full details will be given at the time of your enquiry. In general terms, the options for homemovers meeting our lending criteria will be:
Base Rate Tracker
A rate which moves up or down automatically in line with changes in Bank of England Base Rate.We automatically change the rate on the 1st of the following month after the interest rate is adjusted.
The variable rate charged will not go above a ceiling rate during a specified period of time (eg; 1-5 years). However, if the Ipswich standard variable rate falls below this rate your rate will fall also.
With a cashback loan the homemover receives a lump sum payment on completion of the mortgage.
This is a specified percentage below the standard variable rate charged by the Society for an agreed period of time (eg; 1-2 years). Repayments are therefore lower during the discount period allowing you some extra money to spend on your new home.
Your mortgage payments will be fixed and guaranteed for a specified period of time providing protection against a rise in interest rates. This type of loan will help you budget your expenditure.
If you are remortgaging from another lender the products offered may vary from time to time. Your mortgage adviser will be able to advise when you apply for your remortgage. If you do not qualify for one of the above the Ipswich standard variable rate will apply.
How much can I borrow?
The amount you can borrow will depend on any one or a combination of the following: your income and affordability, the purchase/valuation price of the property, the property type, the type of mortgage required and/or previous mortgage payment history (if applicable).
We'll need to assess your affordability to repay the mortgage and will take into account your monthly income and expenditure. There is no minimum income level and all applications will be individually assessed by our team of mortgage underwriters.
Against Purchase Price/Valuation
The maximum percentage loan for first-time buyers and homemovers is usually 95% of the purchase price or valuation of the property (whichever is lower). This will mean that you have to have at least 5% of the purchase price as a deposit and other associated costs. From time to time certain mortgage schemes may specify different limits. Our mortgage adviser will explain these to you.
Against Property Type
Right to Buy & Right to Acquire applicants can borrow up to 100% of the discounted purchase price. Further monies may be raised for home improvements only by way of additional borrowing. The total amount borrowed must not exceed 75% of the open market valuation.
Self Build applicants can borrow up to 75% of the land value during construction.
Home Buy applicants can borrow up to 75% of the purchase price or valuation (whichever is lower).
Shared Ownership applicants can borrow up to 95% of the purchase price of their share (typically minimum share 50%), provided the Housing Association Lease meets the requirements of the Society's Shared Ownership terms and conditions.
Buy to Let applicants can borrow up to 75% of the purchase price or valuation (whichever is lower).
All lending will be subject to our assessment of your ability to repay. This assessment may include:
- Taking into account your income and commitments
- How you have handled your financial affairs in the past
- Information from credit reference agencies and, with your consent others, for example employers, other lenders and landlords
- Information supplied by you, including verification of your identity and the purpose of borrowing
- Credit assessment techniques
- Your age
- Any security provided
You Choose How to Repay the Loan
There are two basic types of mortgage loan - Repayment or Interest Only. Loans can be taken out on either basis or a combination of both (part interest only/part repayment).
- Pay the interest and capital back every month
- See your mortgage amount decrease over time
- Be sure that your mortgage will be paid off in full (if you maintain payments).
- You pay back the interest-only to the mortgage lender every month. No capital is paid off
- You will owe the same amount at the end of your mortgage as you originally borrowed
- It is recommended that you pay into a separate investment product every month to cover your mortgage amount (capital) at the end of your term
- There could be a risk of a shortfall at the end of the mortgage term meaning that the investment doesn't deliver enough to repay the mortgage amount (capital).
The Society will consider taking a guarantee from close blood relatives, for example, a father for his son. Any guarantor must meet the same status requirements as the borrower(s). Please refer to Financial Assessment above. The Society insists that all guarantors take independent legal advice to make sure that they understand their commitment and the potential consequences of their decision. Guarantors may become liable to repay the full debt outstanding to the Society instead of or as well as you the borrower. Guarantor applications will only be accepted when there is a realistic view that the applicant(s) will be able to service the mortgage in the future.
How do I Make Repayments?
Monthly Payments - Payments will be required on the first day of each month by Direct Debit. This means that we will make arrangements with the bank or building society that holds your current account to make the monthly payment direct to the Ipswich. Where a payment is made on a different date interest will be payable from the 1st until the payment is made. We can only collect the authorised amount, and when the amount changes we will let you know the revised amount with at least 7 working days' notice before the money is collected. The Direct Debit payment system is covered by a guarantee. For full details please refer to 'Paying Your Mortgage by Direct Debit'.
When your mortgage completes there will be initial interest for the period from the date of completion to the end of the month. This amount will be added to your outstanding balance and interest will be charged on a daily basis on the total amount outstanding. Alternatively you can send a cheque to our Member Services Department at our Head Office or make a payment via a UK Credit or Debit Card by calling us on 0845 230 8686. The amount of the payment will be confirmed to you shortly after completion. Your first full mortgage payment is due on the first of the month immediately following completion. The monthly payment of any Life Assurance, Endowment, Pension or ISA policies taken out in connection with your loan is your responsibility, as the borrower. You should ensure that payments are made on time each month and notify the Society if payments are ceased for any reason.
Charging of Interest
Interest will be charged on a daily basis. You may choose when to pay any charges applied to your mortgage account.
- will not be charged on the Higher Lending Charge (referred to on pages 8 and 16) until after 30 November which follows your mortgage completion date
- will be applied to any other charges from the first of the month following completion
Interest is calculated on the balance outstanding on your loan each day.
If you wish to repay a little extra off your mortgage you may do so at any time. Most of our mortgages allow overpayments of up to 50% of the orginal loan amount before an early repayment charge is payable. You should always check your Key Facts Illustration (KFI) or your Mortgage Offer to see details of any early repayment charge which may apply to a lump sum overpayment. Where an early repayment charge is payable this will be calculated at the appropriate rate on the amount of the overpayment. We will only adjust your monthly payments immediately if your lump sum overpayment is £2,000 or above. If you overpay by less than this amount, the balance outstanding on your account will reduce and the amount of interest due will be recalculated immediately. However your monthly payment will not be adjusted until the next interest rate change.
It is normally acceptable to repay the whole of the loan outstanding at any time without notice or penalty except where the terms of your mortgage product state otherwise. The full terms and conditions will be stated in the Key Facts Illustrations (KFI) provided by our mortgage adviser. A discharge fee and possibly a deeds production fee will be charged in accordance with the Society's tariff of charges.
IMPORTANT: IF YOUR LOAN OR PART OF IT IS TAKEN OUT ON AN INTEREST ONLY BASIS, YOUR LOAN PAYMENTS DO NOT INCLUDE THE COST OF ANY SAVINGS PLAN OR OTHER INVESTMENT YOU MAY HAVE ARRANGED TO BUILD UP A LUMP SUM TO REPAY THE AMOUNT BORROWED. IT IS YOUR RESPONSIBILITY TO ENSURE THAT YOU HAVE SUFFICIENT FUNDS TO REPAY THE LOAN AT THE END OF THE TERM. IF NOT YOU FACE THE RISK OF NOT BEING ABLE TO REPAY THE AMOUNT BORROWED. YOU COULD BE FACED WITH INCREASED PAYMENTS AND YOUR HOME COULD BE AT RISK.