Choose the right mortgage

There are many types of mortgages available on the market and it can be confusing to know which one is right for you. We’ve outlined the basics below, but our advice would be to get in touch with us and let us take the pain out of finding the best mortgage or remortgage product for you. Remember – we do not normally charge a fee for mortgage advice.

Our exclusive mortgage deals

We have access to exclusive deals, some of which are only available to our customers. We will be able to let you know what the latest exclusive deals are and whether they fit with your personal circumstances. These deals are not available anywhere else on the high street.

Help to Buy Scheme

The Help to Buy Scheme was originally launched in April 2013 and was designed to encourage people to buy new-build properties in the hope of stimulating the building sector and ending the housing shortage. The Government started offering equity loans of up to 20% of a property’s value to people buying new builds worth up to £600,000 in England and Wales, with a 5% deposit of their own. The loan is interest-free for five years, and then interest builds yearly.

The new Help to Buy scheme was launched on the 8th October 2013 and aims to make getting on to, or moving up, the housing ladder more accessible. It helps existing home owners and first time buyers purchase a home with as little as 5% deposit.

Repayment mortgages

With this type of mortgage (also known as capital and interest) you repay part of the amount borrowed together with the interest being charged each month. In the earlier years, the majority of your monthly repayment is made up of interest, however towards the latter part of your mortgage term the situation is reversed with the majority of your monthly payment reducing the amount borrowed.

Interest-only mortgages

With this type of mortgage you are only paying interest each month. This means that although your payments will be lower, the amount you borrow will still be outstanding at the end of the mortgage term. You’ll need to make alternative arrangements to pay off the mortgage to avoid the property having to be sold, such as taking out an ISA.

Buy to let mortgages

Apart from the purpose of the mortgage, the main difference with a buy to let mortgage is that the lender takes into account the rent you will earn from the property as the primary source of income. Some may also take the landlord’s personal income into account.  Typically lenders will want prospective rental income, verified by independent sources, to meet at least 125% of the monthly interest payment on the loan. This will either be based on the pay rate for fixed or tracker deals

(i.e. the initial rate before the deal ends) or the lender’s standard variable rate (potentially plus an extra 1%+).

Lenders will generally only lend to those with larger deposits, with most deals asking for a least 30% put down by borrowers. The best deals are at the lowest loan to values of 60% or below.

Standard variable rates

Take the rough with the smooth. With this type of rate your payments should rise and fall in line with the Bank of England base rate changes, but not necessarily at the same time or by the same amount. You will almost certainly be paying a higher interest rate than the Bank of England base rate. Most borrowers are transferred to their lender’s standard variable rate once their initial incentive rate period comes to an end.

Fixed rates

Fixed rates give you the security of knowing that your monthly payments are the same. With this type of mortgage, you pay a fixed rate of interest for a set period typically over 2, 3 or 5 years, so you know exactly what you’ll be paying each month even if interest rates change.

Tracker variable rates

Your payments change when interest rates fall or rise. Tracker variable rates are usually linked to the Bank of England Bank Rate, which means they’ll change in line with changes to the base rate. Tracker variable rates usually offer an initial incentive, typically two or three years. For example, the interest rate payable may be set a small percentage above the rate being tracked for an incentive period. At the end of the incentive period the rate payable will continue to track the rate to which is linked but usually at a larger percentage above the rate being tracked.

Capped rates

You will know the maximum you will pay for a set period of time. This type of mortgage offers you the option of knowing the maximum monthly repayments you would have to make during a set period, typically 2 or 3 years.  Capped rates work in a similar way to variable rates, but also offer similar security to fixed rates. The initial interest rate will be set but will vary in line with interest rates. The rate will not exceed a specific upper limit (the cap) for the set period.

Discount variable rates

Allows you to benefit from a discount on the lender’s standard variable rate. If the lender’s standard variable rate (SVR) increases or decreases, so does the discounted rate. For example, if the lender’s SVR is 3.5% and they offer a discount of 1.5% for two years, you will start off by paying 2.0%. If the lender’s SVR increases to 4.0% after 6 months, you will pay 2.5%. Typically, the shorter the discounted period the larger the discount.

Offset mortgages

Your savings will be offset against your outstanding mortgage.  Your main current account, savings account or both are linked to your mortgage. Each month, the amount in these accounts is offset against your outstanding mortgage before working out the interest you owe. You are unlikely to earn interest on your savings which are offset against your mortgage.

Flexible mortgages

Great if you have a variable income. You can vary the amount you pay each month and take payment holidays in some circumstances. It may help to reduce your mortgage with lump sum payments without incurring an early repayment charge.

Simply complete your details on our contact form and then press Submit to send it to us and we will get back to you with the relevant key facts document.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE