Sources of finance and types of mortgage

what must the buyer pay at exchange?

10% deposit

What must the buyer pay at completion?

the purchase price

what else might the buyer pay for besides the price?

Agreed price for extra’s (contents/fixtures)

What taxes are payable on a purchase?

SDLT or LTT; CGT/VAT in some cases

Are solicitor’s fees subject to VAT?

Yes— legal fees attrach it irrespective of their __ position

What are solicitor’s disbursments?

Search fees and HM Land Registry fees (paid in addition to legal fees)

Residential funding source: own resources

Buyer’s saving/gifts used to pay deposit and completion monies

Residential funding source: mortgage loan — core idea?

A lender advances funds secured on the property help meet the price

Residential funding source: proceeds of related sale — how used?

Equity released from selling another property contributes to the purchase

Syndicated loan

a group of lenders jointly fund a high value purchse to share risk

What is equity funding for a public company?

raising capital by issuing shares on the market to fund acquisition

Development finance

A lender funds land+ build, often with step-in rights if the borrower defaults

capital repayment mortgage

Monthly repayment include interest+capital, so the balance reduces over time

Capital repayment mortgage

the loan is fully repaid at term end (after 25 years eg)

capital repayment (payment profile)

early payments are interest heavy but the capital portion grows o over time as the balance falls

Capital repayment mortgage (main advantage)

certainty of clearance: no lump-sum needed at the end; you own the property outright

main drawback of capital repayment mortgage

higher monthly payments vs interest only for the same loan/rate/term

Interest-only mortgage

Monthly payments cover interest only; the capital does not reduce.

Interest-only mortgage — end-of-term requirement

Borrower must repay the full capital in one go (e.g., sale, savings, investments, or remortgage).

Interest-only mortgage — monthly payment effect

Lower monthly payments than a repayment mortgage (same loan/rate/term).

Interest-only mortgage — key risk

Risk of no sufficient lump sum at term end, potentially forcing a sale.

Interest-only mortgage — equity point

Borrower may still build equity if the property’s value rises, despite capital not reducing.

Endowment mortgage

An interest-only mortgage plus monthly payments into an endowment policy (investment) intended to clear capital at term.

Endowment mortgage — current status in the UK

Largely historic; new endowment mortgages are generally unavailable.

Endowment mortgage — principal risk

Underperforming policies cause a shortfall, leaving capital to be topped up from the borrower’s own funds.

What does “equity” mean in a mortgaged property?

The property’s market value minus the mortgage balance; the owner’s stake.

Typical residential funders

High-street banks and building societies.

Typical commercial funders (beyond banks)

Syndicates, equity markets (for PLCs), and development financiers with step-in rights.

Overall funding summary (residential vs commercial)

Residential: buyer funds + mortgage. Commercial: similar sources plus more complex structures (syndicated loans, equity issues, development finance).