With a big financial decision like buying property, there are plenty of different options available to suit a variety of people’s circumstances. Unfortunately, because of these different ways to purchase a property, it can often feel like an overwhelmingly complex and confusing process.
Luckily there are online services such as mortgage advisors that you can easily contact for expert help to find the right mortgage for you. Seeking this advice can prevent you from wondering if you could’ve gotten a better deal.
But before you start looking for a mortgage or go to an advisor, in this article we’ll be looking at the different types of mortgage to help you get a better understanding of what you need to be looking for.
Fixed Rate Mortgage
One of the most common types of mortgage, with over 60% of homeowners choosing a fixed rate as of 2019. With a fixed rate you’ll know exactly what you’ll be paying monthly as the amount of interest gets locked in for a set amount of time. The period that the fixed rate deal lasts can be anywhere from two to ten years.
While on the plus side of things a fixed rate means you won’t have to worry about the monthly amount increasing for the first few years of your mortgage term, if interest rates go down, you’ll still end up paying the fixed rate – meaning you could be paying more than you potentially have to. Even with this potential downside, fixed rate mortgages are still a great option and they’re popular for a reason. A perfect option for planning ahead.
After the fixed rate period ends, the mortgage will convert to a variable rate mortgage, more on that below…
Standard Variable Rate Mortgage
Every mortgage provider offers their own standard variable rate mortgage. With these mortgages they can change the interest rates up or down whenever they decide to, but they usually follow the Bank of England’s rates.
The benefits of this type of mortgage mean that if interest rates go down, you’ll pay less each month and you also won’t usually be charged for making early repayments. The downsides are that if interest rates go up, so will your monthly payments. Standard variable rates can also be one of the most expensive mortgages, so do your research and contact an online mortgage advisor for more help.
A tracker rate mortgage follows the Bank of England’s base rate plus a percentage of that rate on top of it. For example, if your tracker mortgage is base rate plus 3%, it means that you’ll always pay 3% above the current base rate, which is reviewed eight times a year (but not changed with every review).
The above three types are the main types of mortgage that you will see in the UK, however there are various other kinds to fit specific needs.
First Time Buyer Mortgage
If you’re just about to begin getting on the property ladder, start with looking for a first time buyer mortgage. Many of these will allow for a lower deposit of 5% to make it easier to save up. These types of mortgage can really help with owning your first home but still keep an eye out in case there are non-first time buyer deals that are even better.
A guarantor mortgage will require you to have a relative that is willing and able to make mortgage repayments if you can’t. It allows you to borrow more than you would be able to alone and is another way to get help on to the property ladder similar to first time buyers.
With a joint mortgage, you share a house with a friend, partner or relative. This is most commonly done in marriages, although it’s also worth noting that you don’t have to actually live with the person you enter a joint mortgage with. Instead, they can help you with repayments – similar to a guarantor mortgage.
Find The Right Mortgage For You
Researching what’s out there will help you make sure you know what kind of deal you’re getting. Once you have a better idea of what mortgage you need, contact a mortgage advisor to find deals for you.