
Buying a house is an expensive task, which is why most people depend on the support of a mortgage loan in order to get onto the property ladder.
A mortgage is typically granted by a bank, where this allows you to purchase a house even if you don’t have the full payment upfront. Instead, you will pay off the mortgage in monthly instalments, typically over several decades.
Taking out such an important loan can feel daunting, where there are lots of different types of mortgage on offer. Understanding all the financial jargon that surrounds these agreements may feel overwhelming, so it is important to grasp the basics before you proceed.
The type of mortgage you decide on will depend on the property you intend to buy and your financial circumstances. Some mortgages are very common, whilst others are more specialist and are designed for particular homeowners.
We’ve outlined and defined some of the most common mortgage types in the UK - read on to find out more about what’s involved, as well as the various advantages and drawbacks of each option.
Fixed Rate Mortgage
Fixed rate mortgages are one of the most common options, where this means that you’ll pay a set interest rate for a specified time period. As a result, your payments will stay the same no matter what happens with the banks.
This mortgage is a good option for homeowners who need a fixed and dependable rate. Importantly though, you’ll need to remortgage at the end of the fixed period, where this is usually after two or five years.
Tracker Mortgage
In comparison, a tracker mortgage is set at a variable rate, meaning payments will vary depending on the Bank of England base rate. You will pay this changeable rate, plus an additional percentage.
Some agreements will also come with a ‘collar’, meaning that payments can only reduce to a certain minimum amount.
Discount Mortgage
A discount mortgage means that you will pay a variable rate minus a fixed percentage. This type of mortgage typically comes with a two year deal period, after which your payments may become more expensive.
If the Standard Variable Rate (SVR) remains low, you could benefit from affordable payments, but as with other variable contracts, payments can also go up.
Andrew Lee Property Lawyers: Mortgage Solicitors You Can Trust
Mortgage deals can be confusing, particularly for first time buyers. Our expert team of mortgage lawyers are here to support you through the entire process, helping you to find the right lender and the best deal for your home. You can also choose to work with one of our remortgage lawyers for further specialist advice.
Get in touch with us today to find out more.
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