If choosing the right mortgage type is making your head hurt, then don’t worry, you’re not the only one. There’s so many different types of mortgages available to choose from; and it can be confusing knowing which is the right one for you and your circumstance. From fixed rate and tracker rate to interest-only, there’s a wide range of mortgage types of choose from. Each one has their own advantages and disadvantages; but we understand that the jargon used makes it difficult to understand the difference between all the different types of mortgages. Don’t worry, we’re here to explain all the different types of mortgage in the most straightforward way possible.
Repayment mortgage
Every month you will pay back some of the money you borrowed, as well as the interest on it. At the end of your mortgage term, assuming you have met all the mortgage payments, you will have 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 decide to choose this mortgage you will need to have credible arrangements to pay off the mortgage.
Fixed rate mortgage
As the name would suggest, 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; this will be for a set period of time e.g. two, three or five years. This option 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 even 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)
Once your fixed rate term has ended you will fall onto a standard-variable rate. These payments will rise and fall at the lender’s discretion but it will usually track the Bank of England’s rate.
Not sure which type of mortgage is right for you?
Our friendly mortgage experts will listen to your needs, understand your circumstances and help find the right mortgage for you. We’re here to answer all of your mortgage questions or concerns; so please don’t hesitate to get in touch for further mortgage advice.
