Types of mortgages

understanding the loan landscape

There are a variety of mortgages out there, to suit people with different preferences and financial circumstances. Types of mortgages include:

First time buyer

These mortgages are aimed at people buying their first home and balance the best rates available against income, expenses and credit information.

Remortgaging

Remortgaging involves either taking out a new loan with either a new or existing lender and paying your old mortgage off with it.

Interest only

This is where you only pay off the interest on the mortgage each month. Your monthly payment is generally quite a bit less as there is no capital to pay off however you still have to pay off the capital at the end of the term.

Home mover

These mortgages are available if you are looking to move house, where you can port your existing mortgage and take any additional borrowing you may need on a new mortgage product or start a new mortgage from scratch.

Buy-to-let

These are usually for landlords who already own one property, but buy another property to rent out. Buy to Let mortgages tend to come with higher interest rates and a minimum deposit of around 25% of the property’s value although a number of lenders will accept a lower, 20% deposit.

Help to buy schemes

Typically allow first-time or existing buyers without a large deposit to get onto, or move up, the housing ladder, with help from the government. This could help them access lower deposit mortgages.

Fixed, tracker or variable?

Mortgages are available on a fixed or variable rate of interest.

Fixed rate

Where your interest rate is fixed for a set period of time. The main advantage is you know exactly what you will be paying each month, but the flipside is that you will not benefit from falling interest rates.

Tracker rate

This is where you mortgage tracks a pre-arranged independently set interest rate i.e. the Bank of England base rate for an agreed period.

Variable rate

Here, the interest rate on your mortgage is set by your bank or building society and it is subject to change at your lender’s discretion.

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