Different Types Of Mortgages Explained

Different Types Of Mortgages Explained

With so many different mortgages to choose from, it can be confusing knowing which is the right one for you and your circumstance.

That’s why we’ve explained all the different mortgage types in the most straightforward way to help you understand the difference and have an idea of which might be right for you.

Repayment mortgage

Every month you will pay back some of the money you borrowed, as well as the interest. At the end of your mortgage term, assuming you have met all the mortgage payments, you would’ve paid off your mortgage in full.

Interest-only mortgage

You only pay the interest each month, not the capital. This means your payments will be lower but the overall amount you borrowed will still be outstanding at the end of the mortgage term. If you choose this mortgage then you need to have credible arrangements to pay off the mortgage.

Fixed rate mortgage

You will always pay the same amount every month. You’ll pay the same interest rate regardless of what happens to the Bank of England bank rate, for a set period of time e.g. two, three or five years. This can give you peace of mind that you’ll always know what to expect your mortgage payments to be.

Tracker rate mortgage

This type of mortgage tracks the Bank of England bank rate, so your mortgage repayments will change to follow this.

Offset rate mortgage

Your mortgage is linked to a savings account or perhaps a current account. The amount you have in these accounts will be offset against your outstanding mortgage amount. You’re unlikely to earn interest on your savings which are offset.

Standard-variable rate mortgage (SVR)

You will fall onto a standard-variable rate once your fixed rate has come to an end. These payments will rise and fall at the lender’s discretion but traditionally will track the Bank of England bank rate.

Our mortgage advisers will listen to your needs and circumstances and can help find the right mortgage for you. Your initial appointment with us is free, so please don’t hesitate to get in touch for further mortgage advice. If you want to investigate further before that, head over to our Learning Centre on the site where there is more information and guides for you to download.

Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

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