If you are new to the property market or perhaps just feeling a little lost when it comes to mortgages and borrowing we are here to help. In fact, statistics show that as much as 74% of people who are borrowing to buy a house will ask for advice before they choose on a mortgage.
As experts in sales and lettings, here at The Estate Agent Manchester we have put together our very quick guide outlining everything that you should know about the different types of mortgages that you can opt for when choosing your repayment plans.
Fixed rates
This is a common choice made by those who want a bit of security in their payment plans. A fixed rate is when a set interest rate is applied to your repayments for a set amount of time. This is often 2,3,5 or 10 years and can be discussed at initial application.
If you opt for a fixed rate mortgage, then no matter what happens with interest rates during your term your rate will never change.
Standard Variable Rate
A SVR will follow the rates set out by the Bank of England, meaning that they are completely variable with no limits on how high, or low then can reach. This is often the default choice set out by mortgage lenders and is applied if the borrower doesn’t pick a rate option or if their fixed term ends.
Tracker
A tracker rate is another variable rate, however whilst it moves in line with the Bank of England it will usually track slightly higher.
Interest Only
These type of mortgages are not usually offered by lenders. With an interest only mortgage the payments made each month will only cover the interest that has been applied to the amount borrowed and will not pay off the initial borrowing amount.
If you want to look into an interest only mortgage then you will often need to prove that you have some other method of paying off the capital at the end of the mortgage term.
Offset
An Offset mortgage links the savings that you have with your mortgage, meaning that you pay less interest.
In a sense, you are overpaying your mortgage amounts and reducing it quicker over the term of the mortgage.
With most lenders you can combine an offset mortgage with any other repayment option such as trackers, SVR or fixed rates.
This is just a basic overview of the types of mortgages that are open to you. The choice that you make is entirely up to you and should link in to your own situation and financial standing.
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