Close

Our mortgages explained

When you take out a mortgage there are a number of different options available to you including how you pay back your mortgage each month, and the interest rate charged for the term of your mortgage.

The following guide will help you understand the different types of mortgages available and how our interest rates are calculated.
We're here to help

We're here to help

  • 0333 321 1000 02 and 03 numbers are charged at standard call rates and included in most mobile and landline operators inclusive minute packages
  • Request a call back

Repaying your mortgage

There are two ways of paying back the mortgage you take out with Aldermore – interest only or repayment.

Repayment Mortgage

If you chose a repayment mortgage your monthly payments pay back both the interest charged on the mortgage and part of the amount you borrowed.  This means that your mortgage balance steadily reduces throughout your mortgage term. As long as you keep up your repayments your mortgage will be paid off in full at the end of the term.

Interest Only Mortgage

If you chose an interest only mortgage your monthly payments will only pay back the interest on your mortgage. This means that at the end of your mortgage term you will still owe the amount that you originally borrowed and you will need to repay the outstanding balance as a lump sum.

When you applied for your mortgage you will have confirmed the repayment plan(s) with which you intend to settle the outstanding loan amount. It is your responsibility to ensure that your plan(s) remain on track to repay the mortgage at the end of the term.

Aldermore Managed Rate

The interest rate you pay on your mortgage is linked to the Aldermore Managed Rate (AMR). Some banks call this a Standard Variable Rate (SVR) and it can change at any time. The AMR is normally influenced by the cost of borrowing and although it is not directly linked to, it can be influenced by, changes in the Bank of England Base Rate, as well as other market factors.

If the AMR changes, variable and discounted rate mortgages linked to it will go up and down in line with the AMR.

Types of mortgage

Fixed Rates

  • A fixed rate mortgage means the interest rate charged on the loan is fixed for an agreed period of time, usually 2, 3 or 5 years. This means that your monthly payments are protected from the effects of any market interest rate fluctuations during this period of time. If interest rates increase your payments will not rise; however if rates decrease your monthly payments will not reduce.
  • Once the fixed rate period has come to an end, your mortgage will move to a variable rate, known as the reversion rate, which will be linked to the Aldermore Managed Rate (AMR).If the AMR changes, variable rate mortgages linked to it will go up and down in line with the AMR. This means your monthly payments could increase or decrease as this variable rate is influenced by other factors such as market interest rate.

Discounted Rates

  • A discounted rate mortgage means the initial interest rate charged on the loan is the Aldermore Managed Rate (AMR) reduced by a set amount for an agreed period of time, usually 2, 3 or 5 years. As a discounted rate is a variable rate your monthly payments are not protected from the effects of changes to the AMR and could increase or decrease in line with any changes to it.
  • Once the discounted rate period has come to an end, your mortgage will move to a variable rate, known as the reversion rate, which will remain linked to the AMR. This means you will normally have to make a higher monthly repayment than you made during the initial discount period.

Term Variable Rates

A term variable rate means the interest rate charged on the loan is linked to the Aldermore Managed Rate (AMR) for the whole term of the mortgage.  This interest rate is usually lower than the AMR and will increase or decrease in line with any changes to it.

For example, if rates increase your mortgage payments will go up and the total amount you repay over the term of the mortgage will increase. Similarly, if rates decrease, this will be reflected in your monthly payments and the total amount you pay back.

LIBOR

Types of mortgages linked to London Interbank Offered Rate (LIBOR)

  • Single residential investment units
  • HMOs
  • Multi-unit Freeholds


What is LIBOR?

LIBOR is the average interbank interest rate at which a selection of banks on the London money market are prepared to lend to one another.

How does LIBOR link to my mortgage?

If you have a LIBOR linked mortgage this means the variable interest rate on your mortgage is directly linked to 3 month LIBOR, which we review and were applicable, re-set on 15th February, May, August and November.

Any change to 3 month LIBOR will result in a corresponding change to the variable interest rate on your mortgage.

If you'd like to get the ball rolling or have any questions, give us a call on 0333 321 1000.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

  • Mortgages
  • Guide