Pytheas Private Credit (PPC) provides for finance options of properties part of real estate projects that Pytheas participates in; for both purchase and re-mortgage.
PPC understands that everyone has different needs and is in a different financial situation. Whether an EU resident or not, non resident or expatriate purchasing in own name, through a trust or in a foreign currency PPC can deal with the requirement – quickly, efficiently and confidentially.
Strictly available for clients that are interested in buying property of a Pytheas real estate development, PPC can arrange competitive and often exclusive rates, usually on more favorable terms than one could achieve by approaching the banks or other financial institutions directly. Our mortgage broking team is able to provide for finance options for properties in a number of countries and can help you decide which type of mortgage product would be most suitable for you.
The following information will help give you an idea of what you are looking for prior to talking to one of our advisors.
Arranging mortgage finance is our core business. We understand that everyone has different needs and is in a different financial situation. The chances are that whatever your needs, however obscure or particular, we have come across something similar before. So whether you are an EU resident or not, non resident or expatriate purchasing in your own name, through a trust or in a foreign currency we can deal with your requirement – quickly, efficiently and confidentially.
Rising demand, prices and loan sizes have recently presented problems for many mortgage providers. Here at PYTHEAS Private Credit (PPC) we have taken those developments in our stride. The combination of our contact base and buying power means we can arrange competitive and often exclusive rates, usually on more favorable terms than you could achieve by approaching the bank or other financial institution direct.
Unusual requirements are very much the norm, rather than the exception for our clients and we will always endeavor to achieve a suitable solution to whatever circumstances you may present us with.
Credit brokerage fees of up to 1% of the loan amount may be charged.
The way forward
PPC try to make the whole process of arranging a mortgage as simple as possible. However there are some key pieces of information that you need to understand before you decide what will be the best mortgage for you. This guide should help you feel comfortable that you are making the right decision on how much you can afford to borrow, how to repay your mortgage and the different types of mortgage product available to you.
One of the most important decisions you need to make is how much you can afford to borrow. This is dependent on how much cash you already have available, and the amount you can borrow with a mortgage. Most financial institutions have income multiples that they apply when looking at how much you can borrow. Typically these are around 3.5 times your sole income or 2.75 times your joint income. However, at PYTHEAS we have strong relationships with a number of institutions, which means we can often arrange for you to borrow more if it is necessary.
At the end of the day, the key factor is affordability, and as long as you can prove that you will be able to keep up the repayments on your mortgage, PYTHEAS can usually help you to borrow as much as you need.
Buying a new home can be quite a daunting process, and it's often difficult to know where to start from. PPC have the expertise to make the whole process easier for you from start to finish.
How do I repay my mortgage?
When you take out your mortgage, the bank or building society will expect you to repay them the full amount of the loan, plus all the interest at the end of the mortgage term. There are a number of options, and each will have its advantages and disadvantages. You will need to think about these carefully before you decide which route to take.
Repayment Mortgage (Also known as a Capital and Interest Mortgage)
This is the simplest of all mortgages and the only type where you are guaranteed to have repaid all you owe at the end of the term, assuming you have made all of the monthly payments. Repayment mortgages work in a very similar way to simple bank loans in that your monthly payments go towards paying both a percentage of Capital (the amount you owe) and a percentage of Interest (the lenders charge for the money). When you first take out your mortgage your monthly payments are set at a level, which will exactly pay off the loan at the end of the agreed term. At the beginning of your mortgage term a high proportion of your monthly payment goes towards paying the interest and a small amount pays off the capital. As you make more payments, the capital is gradually reduced so the proportion of your payments going towards paying off the Capital increases and the amount of interest decreases. This means that if you move house and cancel your mortgage during the early years you may not have repaid a significant amount of the loan because a large portion of your payments will have gone towards paying interest.
- Guarantees repayment of the loan in full.
- No reliance on the performance of an investment product.
- You can see your loan gradually reducing over time.
- Main disadvantages
- There is no chance of paying off your loan early without a further injection of funds.
- A high proportion of your payments in the early years go towards paying interest.
Interest Only Mortgage
With this type of mortgage the amount you owe remains the same throughout the loan period. You can only reduce the amount borrowed if you pay off part or the entire loan in a lump sum. The capital amount is repaid by an investment typically an Endowment or Pension, calculated to accumulate to the same level as your mortgage by the end of the loan period. Some lenders do not insist on a repayment vehicle and the onus of repaying the mortgage at the end of the term falls on the borrower's shoulders - this is obviously the most risky method. The performance of the investment is not guaranteed and therefore repayment of the mortgage is not guaranteed. You should be aware that any shortfall is always the responsibility of the borrower.
- The investment vehicle is portable so it can be used again and again if you move house and change your mortgage.
- Does not guarantee to pay off the loan at end of term - particularly relevant in today's economic climate.
Combined Repayment / Interest Only (Split Mortgage)
It is possible to have a mortgage where a proportion of it is treated as an interest only mortgage and a proportion like a repayment one. This is most common for people who already have an investment product arranged before taking out a mortgage, which they want to use to help reduce the additional cost of taking out the mortgage. For example, if you want to take out a 350,000 mortgage and already have an endowment that may pay out 100,000 in a number of years time, you could consider an interest-only element to cover the first 100,000 and a repayment element for the remainder.
- The total monthly costs of existing investment product and split mortgage combined could be less than for a pure repayment mortgage with the costs of the investment vehicle on top.
- Does not guarantee to pay off the loan at end of term.
Variable Rate Mortgage
This is the simplest form of mortgage. The interest rate is set by the lender and will vary as rates in the market vary. Generally, if interest rates in the market rise, the lender will increase the rate on your mortgage, and therefore your monthly payments, usually within a few days. If rates fall, the lender will generally reduce your interest rate, thereby reducing your monthly payments. It often takes longer for reductions to be passed on to borrowers than increases.
Variable rates are usually consistent among lenders. However, you will find that there will be some price differential. Lenders with a mutual status (those that are owned by the members - such as building societies) and centralized lenders often offer a lower variable rate. Because variable rates are influenced by interest rates offered for savings, it is felt that the variable rate is unlikely to drop as low as the base rate.
- The least complex mortgage.
- You will get the benefit of reductions in interest rates.
- Often cheaper mortgages available.
- No protection from increases in interest rates.
- Reductions in interest rates tend to take longer to be put in place than increases.
Fixed Rate Mortgage
A fixed-rate mortgage guarantees the interest rate for a pre-agreed period and therefore your monthly payments for that time, enabling you to budget effectively by being certain of how much you have to pay each month. You will also be protected from any rises in interest rates during the period your mortgage is fixed. Once you fix the rate, your payments are guaranteed. The down side to a fixed rate mortgage arises if interest rates fall during your fixed period; your payments will stay the same and will not reduce. Also, there are usually redemption penalties to pay if you cancel your mortgage early. Depending on the product these might apply if you cancel the mortgage during the fixed rate period, but some products apply redemption penalties even if you cancel after the fixed rate period.
- Protected from increases in interest rates.
- Most fixed rate products have redemption penalties.
- No benefit from reductions in interest rates.
Capped Rate Mortgages
A capped rate means that you will pay the lender's standard variable rate but with the guarantee of a maximum upper limit for an agreed period of time. Like a fixed rate, you benefit from setting an upper limit for your monthly payments but here you have the added advantage of seeing your payments reduce if interest rates fall below the capped rate. Occasionally, capped rate mortgages have what is known as a collar - this term simply describes a lower limit to which the interest rate on your mortgage can fall. Capped rate mortgages are usually more expensive than fixed rate mortgages. Also, there are often redemption penalties to pay if you cancel your mortgage early. Depending on the product, these might apply if you cancel the mortgage during the capped period but some products apply redemption penalties even if you cancel after the capped period.
- Protects you from increases in interest rates.
- Often more expensive than fixed rate mortgages.
- Possible redemption penalties.
- Some lenders can be slow in passing on reductions in interest rates.
- Some capped mortgages have a lower limit below which the interest rate cannot fall (a collar).
Discounted Rate Mortgage
A discounted rate mortgage works in a similar way to a Variable Rate Mortgage but offers you a percentage discount from a lender's normal variable rate for a set period of time. The amount of the discount and the period will vary from deal to deal. If interest rates rise, your payments will also rise even though you will keep the same level of discount. If interest rates fall, your repayments will reduce accordingly. There are often redemption penalties associated with discounted mortgages, meaning you will have a penalty to pay if you cancel your mortgage early. Depending on the product, these might apply if you cancel the mortgage during the discounted period but some products apply redemption penalties even if you cancel after the discounted period.
- Can often be the cheapest products, especially in a market where interest rates are falling.
- Wide variety of products available.
- Enable you to benefit from reductions in interest rates.
- No protection if interest rates rise.
- Lenders are often slower in passing on reductions in interest rates than in passing on increases.
- Many discounted products have redemption penalties.
Cash Back Mortgages
Some lenders offer you a cash payment when you take out a mortgage and this can be very useful at a time when you generally have lots of costs to cover. These cash back offers can be for quite significant amounts but are often to the detriment of a better overall product. The cash back mortgage will usually have restrictions and it is essential that you check the conditions of the loan. Nevertheless, they can be very important if you are at the very limit of what you can afford when buying a property and need some extra cash to help with the deposit, the costs of moving etc. Cash backs can apply to most other types of mortgage products such as variable rate, capped and fixed. You often have to repay all or part of the cash back if you cancel your mortgage early.
- Provide initially attractive cash incentive.
- Generally more expensive in the long run.
- Most cash back products have redemption penalties.
Tracker mortgages are a fairly recent addition to the market and were developed mainly as a result of the inability of lenders' to reduce variable rates below a certain level because of the interests of their investors. The interest rate with a tracker is usually set at a percentage rate above the Bank of England's base rate and although the resulting interest rate is usually lower than a lender's standard variable rate, this will vary from lender to lender. These mortgages could be attractive to people who think the UK will join the single European currency because of the opinion that this will lead to a period of relatively low interest rates. Standard variable rates are unlikely to fall to the same levels. Note that there are also other tracker products which are linked to other 'central' interest rates such as LIBOR or EURIBOR.
- Potential to be cheaper than standard variable rates.
- Reductions in interest rates take effect as quickly as increases.
- Most tracker mortgages calculate interest on a daily basis rather than annually and can therefore be cheaper.
- No protection from increases in interest rates.
Flexible mortgages are a relatively new type of mortgage although the majority of lenders now offer them. If a mortgage is 'flexible' it means you are allowed to increase or decrease your monthly payments, rather than keep to a set amount determined by your lender. You can have most of the different product types (e.g. fixed, capped, variable, discounted etc.) as a flexible mortgage although the choice is currently fairly limited. Most are based on the variable rate, so you may not get the cheapest rate. The degree of flexibility depends on the lender but generally, you will need to have made several monthly payments before you are able to benefit from making a reduced payment or taking a break from payments. Other benefits of some flexible mortgages include the ability to treat them like a bank account, having your salary paid in directly with a cheque book or even a credit card. They are particularly popular for people with income that varies during the year, meaning they can make payments to match the timing of income receipts. They are also useful if you are able to pay off the loan quicker than originally thought as you save on interest charges by doing so and can help if you need to increase your borrowings, for example to carry out improvements to the property.
- Ability to vary payments to suit your lifestyle.
- Ability to pay off more of your loan early and save interest.
- May provide full banking facilities.
- Easy to pay off lump sums.
- Can be useful for extra borrowings.
- Rarely the cheapest rates available.
- Usually require consistent payment history before becoming truly flexible.
- Can be fairly complex.
Stepped Rate Mortgages
These are products where the interest rate changes over time but to pre-set levels. For example, a product may have a fixed rate of 4.5% for 6 months then 5.5% for a year then 6.5% for a year then at the lender's variable rate after that. The same can happen with discount mortgages where there may be a 4% discount for 6 months, followed by a 1% discount for two years followed by the lender's variable rate. Generally we think these products are unnecessarily complicated and rarely offer a good deal for the consumer. They make it extremely difficult to compare different mortgages and often have onerous early redemption penalties. They can be attractive if your earnings are going to increase in the near future and you happen to find a product, which matches how you expect your earnings to change.
- Can sometimes match changes in your earnings level.
- Sometimes offer attractive rates.
- Usually unnecessarily complicated.
- Often have onerous redemption penalties.
- Difficult to compare with other products to know if you are getting a good deal
See also Pytheas Real Estate.