It includes interest as well “capital payments” which go towards paying off the amount you’ve borrowed. Your monthly repayment is how much you need to pay towards your mortgage each month. The advantage of longer term is lower monthly repayments, but note that this makes your mortgage more expensive in the long term. You may also be able to get a longer mortgage term, but this is more unusual. Also, you may be obliged to have a shorter mortgage term, depending on your age (typically lenders won’t allow to still be repaying a mortgage over the age of 75).
The traditional term for a new mortgage is 25 years, but you should be able to make your mortgage shorter than this. Note that the longer this is, the more your mortgage will cost you. This is how long you will take to fully repay your mortgage and is agreed upfront. However bear in mind it is only an estimate, as mortgage rates are likely to fluctuate throughout the lifetime of your mortgage and this figure also doesn’t reflect that you’ll likely remortgage to a new deal once your discounted or fixed rate period has ended. The figure was introduced after EU consumer regulation changes in 2016 sought to give mortgage customers a single and consistent number to compare mortgage costs with. APRCĪPRC stands for the Annual Percentage Rate of Charge, it is an interest rate meant to reflect the whole cost of a mortgage for every year of its term, including any fees. So whilst no-one can predict the future, it's worth keeping an eye on rates and the headlines around the economy to plan your mortgage costs. As expressed in financial indexes such as the London Inter-Bank Offered Rate (LIBOR) or swap rates. The price of money, credit and securities are traded at. The stability of the economy and the number of foreclosures in the housing market.
Market competition between different banks and mortgage lenders. The base of interest set by the Bank of England, and other government and central bank measures to restrict or encourage lending. There are three main types of initial rate: It typically lasts two, three, five or ten years, though other periods may be available. This may also be referred to as a the discounted period. The initial rate on a mortgage is the rate you will pay for the duration of your deal. However, to make matters more complicated, this interest will be charged at a monthly rate and compounded (meaning you pay interest on interest).īut, at the same time you will be making monthly repayments on the amount borrowed (unless you have an interest only mortgage), so the amount of money you pay to cover mortgage interest will gradually fall. It goes without the saying the lower this rate, the cheaper it is to borrow money. It is expressed as an annual percentage rate that will be applied to the amount of money you owe.įor example if your interest rate was 2% and you owed £100,000, you would need to pay £2,000 in interest over the year.
The interest rate is how much it costs to borrow money.
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