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Today's mortgage market is more competitive than it has ever been. Never before have you had so many options; fixed rates, discount rates, cash back options, variable rates, capped rates, tracker mortgages - the list goes on! And then you need to choose your repayment option; repayment, interest only, ISA, Endowment, Pension or 'mix & match'!

With all these options available the good news is that you can find the correct mortgage for you. However this improved choice can seem bewildering and you may miss out on the best option for you through confusion, lack of time or simply having too many choices.

In this competitive market it has never been more important to get clear, concise and simple independent advice to help you make the right choice.

This guide is designed to help explain some of the options available to you and to let you know how a mortgage broker can make sure that one of the most important choices of your life is the correct one for you.

Why use a Mortgage Broker?

Choosing a mortgage has never been easy, but in recent years the demand for mortgage products has increased. Gone are the days when the major decision you had to make was between a variable and a fixed rate. Now, every lender seems to have a number of different product, from offset mortgages that set your savings interest against your mortgage interest, to self-certification mortgages for the self-employed, cash backs, discounted rates, fixed rates, stepped fixed rates, etc. etc. etc.

Making sense of all the different options and working out which is best for you is where your Police Federation Mortgage adviser comes in.

A mortgage broker is basically a financial adviser with specialist knowledge of the mortgage market. They have access to special mortgage deals that won't be available directly from the lender and so should be able to get a better deal than a consumer doing their own mortgage research. They will also save you a great deal of time and energy.

We have a specialist department that takes enquiries by telephone or over the internet. An authorised adviser will then telephone to ask a number of questions (which takes about 15 minutes) to obtain more detailed information on your requirements and answer any questions that you may have. The research team will then search the whole of the market using our state of the art technology to find the most appropriate deals for you. If you are happy with the quotations provided then we can handle your mortgage from application through to completion. We can arrange face to face meetings with advisors or we can take care of everything using e-mail and telephone. The choice is yours.

The Mortgage Process

What is a mortgage?

A mortgage is made up of two parts:

The Capital
This is the amount of money that is borrowed from the lender to purchase the property.

The Interest
This is the interest that the lender charges on the capital until it is repaid at the end of the mortgage term.

Types of Mortgage

Repayment mortgage

Each month your payment to the lender repays some capital and some of the interest. As long as you maintain your payments you can be certain that your mortgage will be repaid at the end of the term.

Advantages	Disadvantages
As long as the monthly payments are maintained the mortgage will be repaid at the end of the term - no need to worry about investment returns	If you move house frequently it is difficult to build up equity in the property in the early years, as early payments are mainly interest
Ideal if you wish to limit the risk linked to your mortgage	No possibility of additional investment returns
Simple to understand with payments to one provider	Limited possibility of repaying the loan early without increasing monthly payments

Interest only mortgage

Each month the payment to the lender repays the interest on the loan. In this way the amount that is owed to the lender remains the same throughout the mortgage term. At the end of the mortgage term the lender will require the original amount of the loan to be repaid. A separate savings vehicle is used to build up enough money to repay the loan.

Commonly used savings vehicles are:
Endowments (With profits)
PEPs (Pre April 1999)
ISAs (Post April 1999)
Pensions

Advantages	Disadvantages
Offers the potential for additional investment return at the end of the term or the ability to repay the loan early, subject to investment return	The ability to repay the loan is dependent upon the investment performance of the savings vehicle
The savings vehicle is usually portable when you move house	You are responsible for the repayment of the loan at the end of the term
Choice of a wide range of investments that can be tailored to meet individual needs	Two separate payments to track. One to the lender and another to the investment company
Easy to move the mortgage without disrupting the repayment plan

'Mix & Match'

Many people moving house may already have an endowment plan from their previous loan. Their circumstances may have changed, however, so an additional endowment would not be appropriate for them.

In these circumstances, it is usually possible to arrange for a lender to set up part of a loan on an interest only basis, and part on a repayment basis, thus ensuring that the benefits already accrued under the endowment are not lost. Not only that, but the life assurance already provided under the endowment is not lost.

This method is becoming increasingly popular for people moving on to their next house.

Endowment Mortgages (With Profit)

This type of investment combines a savings vehicle with the life protection needed to repay the loan on death during the term.

Bonuses are usually, but not guaranteed to be added to the plan on a yearly basis and once paid these cannot be taken away.

In this way the endowment aims to provide steady growth over the mortgage term and provide a lump sum, which should allow you to repay the loan although this cannot be guaranteed and is dependant on investment performance.

Advantages	Disadvantages
Guarantees to repay the loan in the event of death during the term	If surrendered early the return may be less than the premiums paid
Portable and can be moved from mortgage to mortgage	No flexibility in premium payments
Once bonuses are added they cannot be taken away	Term should be for at least 15 years
Potential for additional returns	No guarantee that the mortgage will be repaid. The return is based wholly on the investment performance of the chosen provider
Potential to repay the mortgage early	Must have life cover built in whether required or not
Can combine savings plan with life and critical illness protection if required	A Market Value Reduction (MVR) could apply to your endowment (if with profits) in adverse market conditions

A Market Value Reduction is a reduction applied to unitised with-profits funds where the value of the underlying assets is low. The Market Value Reduction, if any, is applied only when the plan is fully or partially surrendered (for example, on early retirement or transfer to another plan) or units switched into another fund.

ISA Mortgage

An ISA (Individual Saving Account) is a very flexible way of saving to repay your mortgage. They do not have a set investment term and contributions may be varied (usually subject to maximum and minimum limits). You can pay on a regular monthly basis as well as making lump sum payments into the plan as long as you remain within the maximum annual limit.

They offer a wide range of investment choices and also have several tax advantages.

Additional protection such as Life or Critical Illness cover is usually purchased separately.

Advantages	Disadvantages
Tax efficient savings	Separate protection plan(s) required
No specific term	Return is reliant on investment performance
Potential to repay the loan early	No guarantee of return
Potential for additional investment return	Can only be taken in single name
Flexible premium payments
Portable - can be moved with your mortgage

Pension Mortgage

This aims to take advantage of the tax free cash that is available from a personal pension plan. As this involves pension planning as well as mortgage planning it can be a very complicated area to consider.

As with all the other options highlighted, there are advantages and disadvantages, however due to the complex nature of Pension Mortgages they should be dealt with on an individual basis and independent advice should be sought.