With many types of mortgages and interest rates on the market, it can be confusing to know which one is right for you, so we’ve outlined some of the basics below. You can always seek further advice from one of our advisers too.
What Mortgages are available?
Repayment
You repay part of the amount borrowed together with the interest being charge each month. In the earlier years of your mortgage, the majority of your monthly repayment is made up of interest. However, towards the latter part, the majority of your monthly payment will be for the amount borrowed.
Interest Only
You are only paying interest each month. This means that although your payments will be lower, the amount you borrow will still be outstanding at the end of the term. You will need to have credible arrangements to pay off the mortgage and avoid the property having to be sold, such as an ISA.
Flexible
You can vary the amount you pay each month and take payment holidays in some circumstances. It may help to reduce your mortgage with lump sum payments without incurring an early repayment charge.
Offset
Typically, a current or savings account (or both) are linked to your mortgage and, each month, the amount in these accounts is then offset against your outstanding mortgage. You are unlikely to earn interest on your savings which are offset.
Buy-to-let
This is usually used for any property you own which has a primary purpose of generating income from letting out the property.
What Interest Rates are available?
Standard Variable
Your payments should rise and fall in line with the Bank of England rate charges.
Fixed
They give you the security of knowing that your monthly payments will always be the same. With this type of mortgage, you pay a fixed rate of interest for a set period, typically over 2, 3 or 5 years.
Capped
You will know the maximum you will pay for a set period of time. It offers you the option of knowing the maximum monthly repayments you would have to make during a set period of typically 2 or 3 years.
Discounted Variable
It allows you to benefit from a discount on the lender’s standard variable rate. If the lender’s rate increases or decreases, so does the discounted rate. Typically, the shorter the discounted period, the larger the discount.
Mortgage
