| Mortgage types explained |
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Linked to base rate. |
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| Variable / flexible rate |
May result in you paying more in the long run with this type of mortgage. A rule of thumb is that the more control you have to vary payments the more you will end up paying. |
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| Fixed rate |
Independent of interest rate fluctuations, good option for instable inflation. |
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| Fixed term |
Paying off a mortgage with higher payments in a fixed timescale ie 20 years. |
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| Offset |
Offset on savings in current and savings account allows you to finish your mortgage earlier. A feature of this kind of mortgage is its flexibility: you can underpay, overpay and take payment holidays. |
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| Fixed amount per month |
For a fixed time, ie two years and then pay a higher amount. after that. This could end up costing you more in the long run but its ideal for a tight budget. |
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| Interest only |
You pay only interest, monthly payments are lower but original amount never changes. |
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| Interest and re-payment |
Higher payments but you take money of loan. |
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| First time buyer mortgages |
Lenders will have attractive deals for first time buyers. Usually a deposit of 5-10% for first time buyers although many borrowers will require a 100% mortgage for their first home. |
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| Pension Plan mortgage |
Joint pension and mortgage payments. |
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| Joint pension & mortgage payments |
Two payments, one on interest on loan and another on an endowment held with life assurance policy. |
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| Investment Linked Mortgages |
Pay towards a savings plan or investment like an ISA which will eventually pay off the loan. Pay interest on loan plus pay into investment plan. |
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| Discounted rate |
Usually offered for a limited time ie two years. |
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| Capped rate mortgages |
The mortgage rate is not linked to interest rate. |
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| Capped rate mortgages |
The mortgage rate is not linked to interest rate. |
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| Buy To Let |
Mortgages designed for rental properties, ideal for propety investors as you can have more than one. You will need to pay 20 - 25% deposit on these types of mortgages. |
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Letting tip |
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Find out what other similar properties are renting for and do calculations to assess viability. Remember to include letting agent fees, occasional improvement costs and budget for gaps in letting. Remember you will have to declare rental income to the taxman. Consider cheaper interest only option as you will get more profit for your monthly rent income as your monthly payments will be cheaper. Again speak to your financial advisor for further information. Shop around for the best deals. |
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