Which mortgage is right for you?
Christopher Clarke explains the different mortgages available to you. But which is best?
Different types of mortgages explained
If choosing the right mortgage type is making your head hurt, then don’t worry, you’re not the only one.
With so many different types of mortgages available to choose from, it can be confusing knowing which is the right one for you and your circumstance.
What types of mortgages are there?
From fixed rate and tracker rate to interest-only, there are a wide range of mortgage types of choose from. Each has their own advantages and disadvantages, but all too often the jargon you encounter makes it difficult to understand the difference - or have an idea of which might be right for you. Fortunately, 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. 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 choose this mortgage then you need to have credible arrangements to pay off the mortgage.
Fixed rate mortgage
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, for a set period of time e.g. two, three or five years. This 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 perhaps 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 has come to an end, you will fall onto a standard-variable rate. These payments will rise and fall at the lender’s discretion but traditionally will track the Bank of England bank rate.
To work out the best rates available that match your requirements, contact Christopher Clarke from Kingsgate Partners who can provide you with the information.