10 February 2012
This information applies to Scotland only
If you’re thinking about taking out a mortgage, there are several different options available. You should look into all the different options carefully to make sure you choose the right one for you. The most common types of mortgage are:-
This is a mortgage in which the capital borrowed is repaid gradually over the period of the loan. The capital is paid in regular monthly instalments, together with an amount of interest. The amount of capital which is repaid gradually increases over the years while the amount of interest goes down.
With this type of mortgage, you pay interest on the loan in monthly instalments to the lender. Instead of repaying the loan each month, you pay into a long-term investment or saving plan which should grow enough to clear the loan at the end of the mortgage term and, in some circumstances, may even produce an additional lump sum. However, there is also a risk that it will not be worth enough to pay off the loan at the end of the mortgage term. This means you will have a shortfall and you will need to think of ways of making this up.
There are three main types of interest-only mortgages. These are:-
With an Islamic mortgage, none of the monthly payments include interest. Instead, the lender makes a charge for lending you the capital to buy your property which can be recovered in one of a number of different ways, for example, by charging you rent.
A mortgage could be available from a number of different sources. Some of the available options are:-
For some people, for example, first-time buyers on a low income, it may also be possible to borrow some of the money you need to buy a home from other, government backed sources. You will usually need to borrow the rest of the money from a normal lender such as a bank or building society.
For more information about government-backed schemes to help you buy your own home, see Finding accommodation.
Instead of going directly to a lender such as a building society for a mortgage, a broker could be used. A broker may be an estate agent or a mortgage or insurance broker. They will act as an agent to introduce people to a source of mortgage loan to help them buy a house.
You may want to use a broker if you find it difficult to get a mortgage directly from a lender.
There are rules about how much a broker can charge for their services.
For more information about mortgage brokers, go to the Financial Services Authority (FSA) website at: www.moneyadviceservice.org.uk.
For more information about mortgages, see Buying a home.
If you’re thinking about taking out a mortgage, you should first make sure that you only borrow what you can afford to pay back. If you do not keep up the agreed repayments, the lender can take possession of the property.
There is more information about buying a home, including detailed information about mortgages on the Money Advice Service website at: www.moneyadviceservice.org.uk.
You can also use their mortgage calculator to help you work out how much you can afford to borrow.
If in doubt, you may want to consult an independent financial adviser. For help with getting financial advice, the Money Advice Service have produced a booklet called Getting financial advice. To get a copy visit the Money Advice Service website at: www.moneyadviceservice.org.uk.
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