Mortgage options explained

Which type of mortgage is right for you?

If you are not in the fortunate position of being able to buy your home entirely in cash, finding the right property is only half the battle. The other half is choosing the best type of mortgage for your specific requirements.

When you’re looking for a mortgage, the first thing you need to do is consider what kind of mortgage is right for your situation. There are many different types of mortgages available so you’ll need to take into account your financial situation, your job security and your future plans when choosing a mortgage. You should also compare different mortgages to find the best deal for you.

Your overall monthly payments

The interest rate on your mortgage will also have an impact on your overall monthly payments. We can help you compare interest rates from different lenders so you get the right deal for your needs.

The term of your mortgage, which is the length of time over which you’ll have to repay the loan, is important. You should choose a term that is comfortable for you, but be aware that longer terms will usually result in higher interest rates.

For most mortgages you’ll need to put down a deposit of at least 5%. This is important because the size of your deposit will affect the interest rate you’re offered and the amount you’ll need to borrow.

Make an informed decision

Choosing the right type of mortgage is incredibly important – and getting it wrong can cost you a lot of money. Narrowing down the mortgage type that is best suited to your finances will ensure you choose a lender and a mortgage product that meet your requirements.

Your mortgage lender will want to know about your income, your debts and your financial goals. You’ll need to be honest about your situation so that the lender can make an informed decision to offer you the right mortgage deal.

Your mortgage should also fit into your long-term plans. If you’re planning on selling your property or moving to a new one, you might want to consider a shorter mortgage term.

So which type of mortgage is right for you?

It depends on your individual circumstances and what’s important to you. There are a number of different types of mortgage available, so it’s important to choose the right one for your individual requirements.

Here’s a brief overview of the different types of mortgage

Standard Variable Rate (SVR) mortgage: A SVR mortgage means your interest rate can go up and down over time, and your monthly payments can vary.The variable rate you are on will be set by your lender and won’t necessarily always rise or fall in line with changes to the Bank of England base rate.

While rates may not rise as much as tracker rate mortgages, lenders will likely pass on the interest rate increase on to their customers.

When your initial mortgage deal comes to an end, your lender may automatically transfer your mortgage to their SVR. This means that your payments could increase as soon as your next pay-ment.

Your lender should send you a letter explaining the new rate and what you can expect to pay. If you haven’t received any communication from them, it is advisable to contact them immediately.

Fixed rate mortgage: With a fixed rate mortgage, the interest rate is fixed for an agreed period of time, typically 2 to 5 years. This gives you certainty over your monthly repayments during that period, but after that the rate will usually revert to the lender’s SVR.

This makes it easier to budget and can make your mortgage payments more manageable over a longer period of time. Fixed rate mortgages have become increasingly popular as borrowers seek to protect themselves from rising interest rates and volatile markets.

They provide a comfortable level of security, knowing that payments remain consistent by usually fixing the rate on your mortgage for between two and five years at a time. Although you may be able to get a fixed rate mortgage for between seven and ten years, too. If you need to switch lenders or refinance your loan during this period, however, then there may be additional fees involved.

Tracker mortgage: A tracker mortgage tracks the Bank of England base rate plus a margin set by the lender. So if the base rate changes, your repayments will change too. Tracker rates are often only available for a limited period, typically 2 to 5 years.

But if there is a reduction in the base interest rate, then you would pay less for your mortgage each month. However, you do not have the security of a fixed rate mortgage and should interest rates in-crease significantly during your loan period then this could be costly for borrowers.

It is important to consider all aspects when choosing a tracker rate mortgage. Talk to a profession-al mortgage adviser before committing to one so they can discuss all the options available and help you find the right solution for your needs.

Discounted rate mortgage: A discounted rate mortgage gives you a discount off the lender’s SVR for an agreed period of time, typically 1 to 5 years. After that the rate will usually revert to the SVR unless you have taken out an extended fixed-rate deal.

During this initial period, borrowers can also benefit from any changes to either the Bank of England Base Rate or SVR, whichever is lower at any given time during your mortgage term.

It is important to note that although discounted rates can help you save money over the course of your loan in some cases, they may not always be more cost-effective than other types of mortgages such as fixed-rate deals.

Overall, discounted rate mortgages can be a useful option for borrowers looking to save money on their monthly mortgage payments. However, it is important to research all the available options be-fore committing to any deal and ensure you are getting the best deal for your particular circum-stances

Capped rate mortgage: A capped rate mortgage offers you a maximum interest rate for an agreed period of time, after which the rate will revert to the lender’s SVR. This can give you some protection against rising interest rates.

Offset mortgage: An offset mortgage allows you to offset your savings against your mortgage balance, so you only pay interest on the net amount. Offset mortgages tend to have higher interest rates than other types of mortgage.

Want to look at what alternative options are available?Ready to switch your mortgage to a different deal, or just want a look at what alternative options are on offer? It’s definitely worth checking the latest offers if your current mortgage deal is about to end, or has already moved to a follow-on rate. To discuss your mortgage options with one of our advisers please call us on 0800 389 9708 or email or use our Live Chat function
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