The Different Types of Mortgage: Explained

The Different Types of Mortgage: Explained

Choosing the right mortgage takes time and requires professional guidance from your mortgage broker so you can be sure to get the product and the deal that best suits your circumstances.

As you would expect, seeking specialist whole of market mortgage advice will throw up a number of different options and different types of mortgages. But what are the different types of mortgages on the market and what are the advantages of each?

First of all it is important to understand the repayment options you will have on your mortgage. Currently there are two: repayment and interest only. However the future of the interest only mortgage is in doubt at this time: yet another reason to secure the professional advisory services of a mortgage broker.

With a repayment mortgage you make monthly repayments for an agreed term. These repayments include the capital borrowed and the interest at the rate stipulated by your deal.

Standard Variable Rate Mortgages

This rate could be the Standard Variable Rate (SVR) under which your payments are linked to the standard prevailing rate of your lender, which is usually a few per cent above the Bank of England Base Rate. As its name suggests, this rate can go up or down and so if you prefer to always know what your payments will be, you may be better off opting for a fixed rate mortgage.

Fixed Rate Mortgages

With a fixed rate mortgage you will pay a fixed rate of interest for a set period of time. With this option you know exactly what you will be paying each month during the period of the deal. Fixed rate terms can last for two years, five years or even seven in some cases. There is usually a financial penalty if you wish to leave the deal before the end of the term.

Tracker Mortgages

A tracker mortgage islinked to some form of base rate, usually that of the Bank of England rate or some other base rate'. It will move up and down accordingly.

Discounted Rate Mortgages

A discounted rate mortgage involves paying a lowerinterest rate at the start and then after a set period moving to another rate which is normally the standard variable rate of the lender.

Seek Whole of Market Mortgage Advice!

There are of course a number of other options on the market, and it's a market that's changing all the time. By speaking to a mortgage broker you will get to understand all your options and find the best one for you. Don't go it alone and stuck in a mortgage minefield!

Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.

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