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Fixed rate, variable rate, tracker, offset – what does it all mean and which mortgage deal would suit you best? Learn a little now and you’ll save heart and wallet ache in the future.
Let us begin the path to mortgage enlightenment...
What is a mortgage?
A mortgage is a specific type of secured loan used to buy property. Given the cost of property, mortgages generally take a considerable number of years to pay back. Mortgages are often taken out for a period of 15-30 years, but can be less or more depending on your personal circumstances.
Use our compare mortgages function and begin your journey today.
Types of mortgage
Mortgages come in two main types:
- Repayment Mortgages
These enable you to pay money from the original loan, plus interest.
- Interest-only Mortgages
These enable you to pay off just the interest.
Both repayment and interest-only mortgages can be fixed-rate or variable. With fixed rates, you would decide a fixed amount to pay every month, which you would normally need to commit to for several years. Variable rate mortgages come in various shapes and sizes. Here your payments will fluctuate depending on the terms of your agreement.
As with all loans, your credit rating will affect the amount that lenders will offer you. Check your credit report prior to comparing mortgages and ensure you get the best deals available to you.
Types of variable rate mortgages include:
- Standard Variable Rate (SVR) Mortgage
Payments move in line with your lender’s interest rate, which in turn is affected by the Bank of England base rate.
- Tracker Mortgage
Payments move in line with the Bank of England base rate of interest.
- Offset Mortgage
Savings are taken into account when calculating interest, so the amount you owe is calculated by the amount of your mortgage minus your savings.
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