RESIDENTIAL MORTGAGES
ISA Mortgages   Repayment Mortgages    

COMMERCIAL MORTGAGES

Your property may be repossessed if you do not keep up repayments on your mortgage.

Commercial mortgages are not regulated by the FSA or arranged via Sesame Ltd.

For residential mortgages we are usually paid by a combination of fee and commission. A non-refundable fee of £195 is payable by you, for our mortgage advice service, before we send you our recommendation report for your mortgage. We may also receive commission from the lender, which is fully disclosed. Based on a £100,000 mortgage a commission payment is typically, £350. If you prefer, we can be paid a fee of £1000 for our advice and recommendation in connection with your mortgage payable when we make our recommendation and we will refund to you any commission we receive from the mortgage lender.

Since most commercial lending is open to negotiation, we will discuss and agree commercial mortgage fees with you, during our initial meeting. In a typical situation, our fee is 0.5% of the lending figure.

Today there are so many different types of mortgage it can be very difficult to decide which products are most suited to our needs. We have provided an outline of some of the options you can consider such as ISA and repayment mortgages. All individuals advising on mortgages must hold an industry-recognised qualification that meets FSA standards. Our mortgage advisor, Barry Butlin, holds the Certificate in Mortgage Advice and Practice (CeMap).


RESIDENTIAL MORTGAGES

ISA Mortgages
An ISA mortgage is a mortgage whereby an ISA will be effected with the intention of building up a cash sum to repay the capital borrowed. Like an endowment, the borrower pays the interest on the loan for the full term, whereupon the ISA is encashed to repay the capital. If the ISA grows faster than predicted then it may be possible for you to repay your mortgage early.

It's important to take a realistic view of the relative risks involved in ISA mortgages. If growth in your ISA is less than that assumed, it will be necessary to increase contributions to meet the shortfall. Regular reviews are carried out so that you can judge whether you need to increase contributions at any point to meet the funding target. As ISA growth assumptions, like endowment bonus rate assumptions, tend to be on the conservative side, it is possible that the proceeds will be insufficient to repay the mortgage on the due date.

ISAs permit up to £10,200 to be invested in the 2010 / 2011 fiscal year. The taxation treatment of investments held within ISAs makes them very tax efficient and, all other things being equal, an ISA will grow in value more rapidly than an endowment owing to the fact that less tax is deducted along the way. ISAs are also a rather more flexible mortgage-funding vehicle than an endowment policy. Whereas hefty early surrender penalties apply to endowments, the early encashment charges on ISAs are generally nowhere near as great.

To summarise, the main advantages of an ISA mortgage funding arrangement are as follows:
- The choice of a wide variety of funds
- The facility to switch providers with ease
- The tax free growth on assets held within ISA funds
- The lower early encashment penalties applicable to ISAs
- The flexibility to vary contribution levels
- Early mortgage repayment if your plan performs well
- The 'transparency' of returns offered by unit linked investment

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Repayment Mortgage
You might be attracted by the idea of paying back capital as you go. This method is usually one of the cheapest options available, in terms of the monthly payments you must make. But if you decide on this route, it is normally wise to take a life assurance policy as well, to cover the outstanding debt if you die before the end of the term.

This is not absolutely essential if you are single, with no dependants. But if you do die before the end of the term, it could mean you are leaving a financial mess for your executors to sort out. The interest on the loan will still keep on clocking up, and it could take a while for your place to be sold. A Mortgage Protection policy, which aims to pay out the capital outstanding at the same time you die, is the cheapest type of policy.

When you add on the cost of this insurance, repayment mortgages are not quite as cheap as they first appear. In addition, you should be aware that in the early years of the loan, you are actually paying back very little capital - perhaps only a few pounds a month. Most of your money in the early days goes to pay the interest. But you catch up later because, in the last few years of the loan, most of your monthly payments go towards repaying the capital.

Repayment mortgages are cheaper than the other types when mortgage rates are high, and they do have an extra bit of flexibility. If you find it hard to meet the monthly payments, lenders will often allow you, as a short term measure, to pay just the interest and no capital until you are back on your feet again.



COMMERCIAL MORTGAGES
C Alexander & Partners have excellent, specialist facilities for arranging commercial finance for all types and sizes of business premises. Funds are available from most major banks and institutions so whether you are considering a shop, office, manufacturing, industrial or warehouse site, we are here to help.

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Bases, levels and reliefs from taxation are subject to change.