Types of mortgage
Different mortgages have different rates of interest and the way interest applies also varies between contracts. The type that is best for you will depend on your personal circumstances and budget.
Variable Interest Rate
The interest rate payable will vary in line with the Bank of England Base Rate. Your payment will generally be adjusted within one month of the announced change.
Fixed Interest Rate
The rate will be fixed for a specified period after which the rate will adjust to the lender’s standard variable rate prevailing at the time.
Discounted Interest Rate
The rate charged will be a set percentage below the standard variable rate. As rates vary so will the discounted rate, but the set percentage difference will remain the same.
Capped Interest Rate
The variable interest rate will be payable but will be capped at a maximum rate for a specified term. This ensures that, for the agreed term, there will be an upper ceiling on the interest rate you pay.
Cash-back Mortgage
Often used as an incentive for first-time buyers, the cash helps pay for incidental costs of moving into a new home. The interest rate is normally variable. Penalties are likely to be applied if the mortgage is repaid or transferred in the early years.
Flexible Mortgage
This is a type of mortgage linked to your bank or deposit account. It allows you to retain flexibility in the repayment of your mortgage throughout the term. Features include being able to increase and decrease your payments and borrowings and, in certain circumstances, temporarily cease payments. A flexible mortgage is normally arranged on a variable interest basis and current/deposit account balances can offset the mortgage outstanding, therefore reducing the overall interest payable.
Bridging Loans
A bridging loan could be used to buy a house before the sale of your existing property is complete. The purpose is to secure the purchase of the new property and save you money and stress. However, these loans are expensive and need to be approached with caution. There are two main types of bridging loan: 'closed' and 'open'. A closed bridge is available to homebuyers who have already exchanged on the sale of their existing property. As very few sales fall through after exchange lenders are happy to offer closed-bridge financing. An 'open' bridge is taken out by buyers who have found their ideal property, but may not have put their existing home on the market. A lender will need to be very certain of your affordability of sustaining the interest on the loan for the duration of the sale. It will also insist on you having lots of equity in your existing property should you have to reduce the asking price.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The precise amount will depend on your circumstances and/or amount of borrowing. We will notify you of any costs before any advice is provided.
