Housing Loans
Core concepts
Understand mortgage structures: repayment (capital + interest) versus interest-only (capital repaid at end via a vehicle). Know LTV, loan-to-income, affordability, fixed vs variable rates, early repayment charges, and arrangement fees. Learn the mortgage advice process and the role of protection (life/CI) linked to borrowing. Grasp equity, negative equity, and remortgaging.
Traps
Questions confuse APR (includes fees, annualised) with the headline rate. Watch for early repayment charges on fixed deals and the difference between porting a mortgage and remortgaging. Another trap: interest-only requires a credible repayment vehicle.
Rule of thumb
Monthly repayment on a capital-and-interest loan can be estimated with the annuity formula; for a quick check, a £200,000 loan at 4% over 25 years is roughly £1,050–£1,060 per month.
Worked example
£200,000 at 4% over 25 years: monthly rate 0.04/12 ≈ 0.00333, n = 300. Payment ≈ P × r / (1 − (1+r)^−n) ≈ £1,056. An interest-only loan at 4% would cost £200,000 × 0.00333 ≈ £667/month, but leaves £200,000 to repay at the end.