Considering a mortgage but not sure which mortgage is best suited for you? This article will take you through the different types of mortgages in the UK and a brief of each one.
Capped-Rate Mortgages UK:
A capped mortgage is like a fixed-rate where it will not rise above a pre-set rate called a cap, however, if the lender standard variable drops below the capped rate your rate will fall in line with it, but if the variable rate rises above the capped rate your rate will not rise above the capped rate. A capped rate is normally only for an introductory period, typically anything from 2-5 years.
Discount Mortgages UK:
This type of mortgage is fixed at a set percentage below a lender’s standard variable rate, but the standard variable rate could change, which means the amount of interest you would pay on your mortgage repayments could also change, but the interest you pay will always be charged at the agreed fixed percentage below the standard rate.
Flexible Mortgages UK:
With flexible mortgages, it could allow you to make underpayments, overpayment’s and take payment holidays to suit your financial situation, this type of mortgage could best suit you as you can also make additional overpayments to your mortgage which means paying less overall interest.
Guarantor Mortgages UK:
If you are someone who doesn’t have enough income to qualify for a mortgage on your own, then this mortgage is a great alternative. With this type of mortgage having a guarantor provides a guarantee they will repay the amount borrowed if you do not repay the agreed payments.
Help To Buy Mortgages UK:
This mortgage scheme is available to those who wish to buy a new build property and do not already own a previous property. You would need to put down 5% of the home’s value for a deposit and then the government will then boost this amount with an equity loan meaning you need to secure a mortgage for the remaining amount. London helps to buy provides a higher equity loan (40%) than the rest of England to reflect higher property prices.
Joint Mortgages UK:
If you are considering buying a property with someone and looking for a joint mortgage, then this type of mortgage could be for you. A joint mortgage is when you apply to borrow money to buy a home with someone else such as a partner, a friend or a relative. If one of you are either late or can’t fulfil payment, then the other person must pay the whole amount.
Offset Mortgages UK:
This mortgage will benefit those with a savings account. The money in your savings is not used to pay off your mortgage but instead it is used to lower the total interest you will be charged on your repayments each month. This method of mortgage will help make your mortgage repayments cheaper, but you will not earn any interest on those savings your mortgage is ‘offset’ against.
The amount of money you need to repay on your mortgage against what you have in your savings account. Lenders ‘take away’ the amount in your savings account from how much you owe on your mortgage. You will only pay interest on what is left which means you will pay less interest than if you had a repayment mortgage.
Standard Variable Rate Mortgages UK:
SVR also known as a standard variable rate mortgage is the interest rate set by your mortgage lender. After your tracker, fixed or discount rate mortgage is over, you will likely switch to a standard variable rate mortgage unless you can re-mortgage for a better deal.
Tracker Mortgages UK:
This mortgage is a type of variable mortgage. The interest on it tracks another rate, usually the Bank of England base rate which is almost always set at a percentage above the rate it tracks. With a tracker mortgage when the base rate falls, your payment will be cheaper but if it rises your payments will increase. When any changes happen, your lender will write to you regarding the change telling you the new rate and your new monthly payment.
95% Mortgages UK:
From the 19th of April 2021, a new government-backed mortgage scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £60,000 but also help get aspiring homeowners on to the housing ladder. Lenders will be offered the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks from the government.
Buy To Let Mortgage UK:
Buy to let mortgage advice we recommend you choose this type of mortgage if you are looking to buy a property as an investment rather than a place to live. If you wish to rent out a new property most lenders prefer you not to finance your purchase with a standard residential mortgage.
Equity Release Mortgage UK:
Equity release mortgage refers to a range of products letting you access the equity; also known as cash tied up in your home if you are older. The amount can be released as a lump sum or in several smaller amounts or even as a combination of both. A lender gives you cash in return for a share in the proceeds of the sale of your property further down the line, but an equity release loan is nor settled until after you leave your home.