Mortgages Guide

A mortgage is a loan that is taken out to buy a property in the UK. In most cases, the lender will retain ownership of the property until the loan is fully repaid. When applying for a mortgage, there are several factors to consider, such as the type of mortgage, the interest rate, and the length of the mortgage term.

There are several different types of mortgage available in the UK, each with its own advantages and disadvantages. Some of the most common types include:

• Fixed-Rate Mortgages: As the name suggests, the interest rate on a fixed-rate mortgage is fixed for a set period, usually between 2 and 10 years. This means that you will know exactly what your monthly payments will be for the length of the fixed period, making it easier to budget. However, if interest rates fall, you may end up paying more than necessary.
• Tracker Mortgages: The interest rate on a tracker mortgage moves in line with a specific base rate, such as the Bank of England base rate. This means that your monthly payments will go up or down as the base rate changes. This type of mortgage is ideal if you think interest rates will fall, but if they rise, your monthly payments will go up.
• Discounted Rate Mortgages: A discounted rate mortgage offers a reduced interest rate for a set period, after which the rate reverts to the lender's standard variable rate. This type of mortgage is ideal if you are looking for lower monthly payments at the start of your mortgage term.
• Capped Rate Mortgages: With a capped rate mortgage, the interest rate is set by the lender but there is a maximum interest rate you will have to pay. This type of mortgage is ideal if you are concerned about interest rates rising.
• Offset Mortgages: An offset mortgage links your savings or current account to your mortgage. Interest is calculated on the difference between your savings and your mortgage balance, rather than the full mortgage amount. This means that if you have a large amount of savings, you may be able to reduce your monthly mortgage payments.

When choosing a mortgage, it is important to consider the interest rate, as this will affect your monthly payments and the overall cost of your mortgage. There are two types of interest rate available in the UK:variable and fixed.

• A variable interest rate can go up or down at any time, depending on market conditions. This means that your monthly payments may change.
• A fixed interest rate, on the other hand, stays the same for a set period, giving you the peace of mind of knowing exactly what your monthly payments will be.