Understanding the various mortgage product types available in the UK is essential for making the right decisions about financing your property, whether you are buying your first home, looking for somewhere smaller or investing in property. In this guide, we will explain each mortgage option in detail, so you have a thorough understanding when you're ready to apply for a mortgage and to inform you on what mortgage products may fit your individual circumstances.
Useful guides
Mortgage types
Mortgage products
What kinds of mortgage products do we offer?
Repayment and interest-only mortgages
Repayment mortgages: This type of mortgage involves making monthly payments that cover both the interest and a portion of the amount borrowed to purchase your property. By the end of the mortgage term, the loan is fully paid off and you will own the property outright. This option is the most common mortgage type as it allows buyers to budget for their mortgage payment each month for the duration of their current mortgage deal. As such, it’s suitable for most types of buyers.
Interest-only mortgages: This type of mortgage allows you to only pay the interest on the loan each month for a set period, generally between 5-10 years. This means that the principal amount remains outstanding and needs to be paid in full at the end of the agreed term. Alternatively, you may choose to refinance the mortgage at this time. This type of mortgage is generally suited to those with long term investment strategies, often with the mortgage amount invested each month into higher return stocks and share options. It can also be a useful option for those who may have temporary financial constraints. In the past, interest free mortgages were used by those who planned to sell the property at the end of the fixed period and pay off the amount outstanding from any profit. Those buying renovation property to sell on therefore may find this mortgage type suitable.
Standard variable rate (SVR) mortgages
These mortgages have an interest rate that fluctuates based on the lender’s standard variable rate which is influenced by broader economic conditions and generally aligned with The Bank of England base rate. Unlike a fixed rate mortgage, SVR doesn’t have a set term so monthly payments can vary, offering flexibility but also the risk of increased payments if rates rise. This mortgage option is generally suited to those who can withstand monthly payment increases who want to benefit from lower interest rates.
Fixed-rate mortgages
This mortgage type guarantees a consistent interest rate for an agreed fixed period of time. This stability means your monthly payments won't change during the fixed term, offering predictability and protection against interest rate hikes. This is a good option for those who prefer financial stability and want to lock in a rate to safeguard against potential future increases. At the end of the fixed term, these mortgages tend to revert to SVR terms.
Tracker mortgages
Tracker mortgages are rate linked mortgages that have an interest rate which shifts in response to specific criteria, like the Bank of England’s base rate or London Interbank Offered Rate (LIBOR), plus a set margin above or below the benchmark rate. As this base rate fluctuates, so does your mortgage rate and monthly payments. This type of mortgage works well for those who are comfortable with varying payment amounts and seek to benefit from potential reductions if the base rate decreases.
Equity release mortgages
These are usually tailored to homeowners who wish to unlock the value of their property without selling it. Often this mortgage option is reserved for those over 55 however, they can be offered to people who are selling a property due to divorce.. This type of mortgage allows you to borrow against the equity in your home, with repayment typically occurring when you sell the property, move into a care facility or pass away.
Offset mortgages
Offset mortgages link your savings account with your mortgage, using the savings balance to reduce the mortgage principal on which interest is calculated. This approach can help decrease your monthly payments or shorten your loan term. It’s a great option for those with substantial savings who want to reduce the total interest paid over the life of the mortgage.
What are the fees associated with getting a mortgage?
When applying for a mortgage, it’s important to balance the various fees that may be applied with any potential savings. Fees are typically added for mortgage arrangement charges, valuation costs, legal fees and possible early repayment penalties if you decide to switch mortgages. Consider working with a fee-free broker who can assess these costs for you.
What is the difference between a fixed-rate and a variable-rate mortgage?
A fixed-rate mortgage has an interest rate that stays the same for a set period, ensuring your monthly payments remain consistent. A variable-rate mortgage, on the other hand, has an interest rate that can change over time, meaning your payments can increase or decrease depending on market conditions.
How does remortgaging work?
Remortgaging means replacing your existing mortgage with a new one, either from your current lender or a different one. This process allows you to obtain a more favourable interest rate, access the equity in your property or adjust the terms of your mortgage.
The benefits of using a mortgage broker
Using a mortgage broker has many benefits that you may not experience using an alternative lender such as a national bank.
Personalised service
One of the significant differences of using a mortgage broker rather than a high street bank is the personalised service you receive. This ensures that the information given is adapted to you, allowing for you to make the right decisions for your circumstances.
Access to a wide range of lenders
Another benefit of using a mortgage broker is the access to a wide range of lenders. This means that they know which lender has exclusive deals or offers to take advantage of, giving you the potential to secure a more advantageous deal.
Tailored related products
Brokers can offer tailored, related products which can better fit your situation. They can offer you mortgage products that are personalised to your specific situation.
Faster communication
Mortgage brokers are readily available to speak to you as and when you need, offering a much more communicative and personal service.
Ongoing support
Brokers will prioritise building a personal relationship with ongoing support throughout your mortgage journey. When you need help there will be someone on hand.
- Call: 0115 870 9520
- Email: [email protected]
Tools and resources
There are many tools available to help you find the right mortgage however, it’s always best to consult with a professional, experienced adviser. We offer a diverse selection of tools and resources designed to guide you through every step of the mortgage process. These include:
Latest news: To help you stay informed, we have a collection of jargon-free articles that answer your pressing mortgage questions, offer professional insights and keep you updated on the latest industry news. Our goal is to make your mortgage journey as stress-free as possible by providing you with the knowledge you need at every step.
Useful guides: Our range of comprehensive guides break down complex mortgage topics into simple, understandable terms, helping you understand different products and choose the most suitable one for your needs.
Best buy tables: Explore our up-to-date best buy tables to access the latest mortgage deals across the UK. These tables are regularly updated, ensuring you have the most current information on mortgage offers. We provide options for various mortgage types, but speaking with our mortgage brokers can help you find deals tailored to your specific needs.
Leaflets: Look through our selection of leaflets for an easy-to-understand overview of our financial services. These straightforward resources are perfect for quickly explaining our products. They provide a useful introduction to how we can support your financial goals.
FAQs: Find detailed answers to frequently asked questions about mortgages, covering everything from basic concepts to specific mortgage types.
Mortgage calculators: We offer a range of mortgage calculators to provide clients with a practical way to plan your mortgage payments based on your needs and situation. Assess how much you can borrow, estimate your monthly payments and explore various repayment plans.
Key calculators include:
- An affordability calculator to evaluate how much you can borrow based on your financial situation.
- Our repayment calculator to determine what your monthly mortgage payments might be.
- A stamp duty calculator to calculate the stamp duty costs for your property purchase.
- Our overpayment calculator so you can see how making extra payments can reduce your mortgage term and interest.
Contact our experienced team for a personalised mortgage plan.
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits