Week 7 Flashcards
(28 cards)
In basic, I take out a mortgage from Dylan bank, I fail to pay, what happens?
Dylan bank takes possession of the property, sells it to pay off loan and interest.
What is negative equity? For example if mortgage was negative equity?
It means the value of the property will not pay for the rest of the outstanding mortgage payments.
If you want to buy a property, what might 3 basic things a bank will look for before lending you the money?
Good income, good credit score and a secure employment.
What might 4 benefits to renting be?
Can be cheaper
Don’t require large deposit
Flexible payment sometimes
Landlord takes care of maintenance
What is a mortgage, mortgage term and capital borrowed on a mortgage?
Simple
Length of time on the mortgage (5-30 years)
Capital borrowed on a mortgage is what you still owe bank after for example your paid deposit
What is a repayment mortgage?
Its basically just you paying your loan and interest
What is an interest only mortgage?
When you only pay the interest for ex $300 interest, after 20 years when done, you still owe the entire $100,000 capital
Why might buy to let be interested in an interest only mortgage?
They only have to pay interest on mortgage, whilst renter pays them in full . They could sell later
What is a fixed rate mortgage?
When the interest rate payments are fixed for a period of time, after such you will pay the lenders standard variable rate.
What might 3 advantages and disadvantages of fixed rate interest be?
Can make interest rate more affordable for period, allows financial certainty for periods, allows to calculate if new home costs of everything to budget
Standard variable rate interest may be higher, interest rates can cost more, early repayments charges
What is an SVR?
Standard variable rate which can change at lender discretion
What might 3 advantages and disadvantages of an SVR be?
Flexible, affordable if low interest rates, lower interest rates easy to pay
Can become more expensive, uncertain, rate can change at any time
What is a tracker mortgage?
Similar to an SVR, however there is no lender interest rate discretion, instead it follows bank of Englands base rate.
How does mortgage repayment work in silly basic?
You pay until capital borrowed is paid (interest plus loan payments) until mortgage is 0.
For those with a mortgage, and theyre still paying, what might they use if theyre aware of risks if they die?
Life assurance
If you cant pay due to sickness or reduddancy who could help?
Maybe house insurance or health insurance.
What is equity in a home?
The difference between property value if sold and loan still outstanding
What does LTV stand for and what is it?
Loan to value
It measures the value of the mortgage against the value of the property being purchased.
How could you lowers your LTV?
A bigger deposit
Do a quick LTV ratio for me
Property worth $1,000,000
Dylan has deposit of $400,000
LTV ratio?
60% ($600,000)
Whats APR?
Shows all interest rates and fees.
Example 4% APR
vs
4% interest rate and 1k fees is 4.5% APR
the 4….5 means hidden fees basically
Should you take a mortgage based on APR?
No because some borrowers will remortgage for lower rates
List some costs of buying a home?
Stamp duty, house insurance, life assurance, legal fees, convayencing fees, repairs
What is an equity release scheme?
Getting a loan essentially and bouncing it off the value of your house. This is repaid when you die and the house is sold (plus interest rates)
