Alliance Leicester Year Fixed Max LTV 90%

Mortgage Plan : 2 Year Fixed Max LTV 90%

Initial Interest Rate: 5.87% until 30/11/09

Rate for remaining term (Variable): 7.89%

Overall cost of comparison (APR): 7.8%

Early repayment charges Apply?: Yes*

Product Fee: £599

Loans available between £25,000 and £250,000, fixed until 30 November 2009.

10% Overpay facility.

*Early Repayment Charge: You are only tied into your mortgage during the fixed period.

Repay all or part of your mortgage before 30 November 2009 and pay a charge of 3% of the amount repaid.

Link to previous article: Alliance Leicester Premier 2 Year Fixed Max LTV 90% Mortgage Plan
Other Related Link: Alliance Leicester Premier Fixed Rate mortgages
Alliance Leicester Premier Tracker mortgages
Alliance Leicester 2 Year Fixed mortgage Plan

Can you afford a mortgage or loan?

Taking out a mortgage is one of the biggest financial commitments you can make, both in
terms of the amount you borrow, and the time you may take to repay it.

Are you sure you can afford it?

You may be able to afford the repayments now, but if you borrow a large amount over a long
period of time think what could happen if, for example, your income falls or you lose your job. Or what if interest rates rise and your monthly repayments go up?

How could your income fall?

Your income could fall if:
■ you lost your job, or had to take a drop in income;
■ you or your partner stopped work to have a child or to look after a dependant; or
■ you became ill and couldn’t work.


Could you keep up your mortgage payments if your income falls?

How could your mortgage payments go up?

■ Your mortgage payments to your lender could go up (or down) if interest rates change.
Mortgage interest rates are related to the interest rate set by the Bank of England and your lender will usually apply some or all of any change to your mortgage.
■ Unless your mortgage rate is fixed for the full term of your mortgage, this will affect you.
■ Often, special rates are for a set period only, so when this comes to an end your payment will change – it could be much higher. Although interest rates have been stable over the
past few years, this could change. In the past, interest rates have risen from 7.5% to 15% in just a few years. Interest rate rises could increase your monthly payments considerably, making it difficult for you to afford them.

The following examples show how different interest rates can affect your payments.

Example 1: repayment mortgage

You borrow £100,000 over 25 years on a repayment mortgage, initially at a rate of 4%:



Example 2: interest-only mortgage
You borrow £100,000 over 25 years on an interest-only mortgage, initially at a rate of 4%:

As you can see clearly, there is a significant difference in the mortgage repayment money in the two schemes.

Don’t forget that rates could be higher than those assumed here.

In the next article, let’s cover some more details of the mortgage affordability.

Link to Previous article: Important Contacts for mortgage & Loans

Types of interest rate deals

In this article, we present a detailed description of the type of interest rate deals that you can explore for you mortgage and loans. Some content presented in this table is taken from the official sites of FSA, hence the information is correct as on the date of publication of this article on mortgage and loans. Please consult your financial advisers in case of doubts.

Type of interest rate deals	How does it work	Charges if you repay early	What in it for you?
Standard variable rate	Your payments move up or down with the lender's own mortgage rate, which is usually driven by the Bank of England's base rate.	Not usually, but check and see.	-- Usually you can leave your lender without any penalties or problems. -- You're in control. You can usually pay back extra amounts (and cut your interest costs) without a penalty. -- It moves with interest rates. So if interest rates go up, so will your monthly payment. -- It will almost certainly be expensive compared to other deals. -- The lender may not reduce, or may delay reducing, their variable rate even if the Bank of England rate goes down.
Tracker rate	A variable rate loan with an interest rate that's at a set amount above or below the Bank of England or some other base rate, set independently from the lender. It tracks (moves up or down with) that rate.	Sometimes during any special deal period and maybe even after the period too.	-- It can pay to go for a tracker if you can afford to pay more when interest rates go up, in exchange for benefiting when they go down. -- It's not a good choice if your budget won't stretch to higher monthly payments.
Discounted interest rate	Your monthly payments can go up or down, but you get a discount on the lender's standard variable rate for a set period of time. At the end of the deal, you usually change over to the standard variable rate.	During the special deal: yes, almost always. They can apply even after the end of the special deal period as well.	-- It gives you a gentler start to your mortgage, at a time when money may well be tight. But you must be confident you can afford the payments when the discount ends. -- The discount period is limited, so don't get used to those early low repayments. -- You may not be able to make overpayments and pay off the loan early without penalties -- The lender may not reduce, or may delay reducing their variable rate even if the Bank of England rate goes down.
Fixed interest rate	Your payments are set at a certain level for an agreed period. At the end of that period, they'll usually switch you to the standard variable rate.	During the special deal period: yes, almost always. They can apply even after the special deal period, too.	-- Your payments will stay the same in that period, even if interest rates go up. -- This gives you the security of knowing that you can afford your payments and will make it easier for you to budget. -- If rates go down, you won't benefit. Your payments will stay at the higher rate. -- You may not be able to make overpayments and pay off the loan early without penalties.
Capped rate	Your payments are variable and often linked to a base rate, but fixed not to go above a set level (the 'ceiling' or 'cap') during the period of the deal. At the end of the period, you are usually charged the lender's standard variable rate.	During the special deal: yes, almost always. They can apply even after the end of the special deal period as well.	-- You know the maximum you will pay for a set period of time. -- Useful if you want the security of knowing that your payments can't rise above the set level, but still benefit if rates fall.
Collared rate	May be used in conjunction with a capped rate or a tracker (or both). Your payments are variable but will not fall below a set level (the 'collar').	Not usually, unless it is used in conjunction with a capped rate or a special-deal tracker rate (or both). But check and see.	-- It may be part of another interest-rate deal which otherwise appears attractive. But note that if the rate payable is only just above the 'collar' and you think rates will fall, you may not get the full benefit of a reduced payment.

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