Which Mortgage is right for me?

Taking out a mortgage is a massive decision, so choosing which mortgage to go for out of all the available deals cannot be taken lightly.

The first important decision is to decide how the loan is going to be paid, which could either be by a repayment vehicle, repayments alongside interest or a mixture of both.  Once the best option has been determined the right type of mortgage is required.  The following are some popular types to choose from:

Which Mortgage Type?

Fixed rate mortgage

For a defined period of time the interest is fixed a specific interest rate, making much easier to plan finances. The banks variable interest rates may fluctuate over the fixed period.  If the rate rises above the fixed rate you save, but if the rate falls below the fixed rate the benefit is lost.  Fixed rate deals are typically set at a higher rate than the banks standard rate.

Discount mortgage

A discount mortgage comes with an initial discount off the lenders standard variable rate for a set period, which can ease the financial pressure in the early days of the mortgage. When the discounted period comes to an end, the payments will move up to the pre determined variable rate.  

Tracker mortgage

A tracker mortgage tracks the Bank of England base rate for a fixed period of time and then reverts to the lenders standard variable rate.  During the tracker stage of the deal repayments will increase or decrease in line with changes to the Bank of England base rate.

Flexible mortgage

Flexible mortgages are as their name suggests flexible. Overpayments can be made and payment holidays can be taken, effectively allowing the borrower to deviate from the standard repayment plan. Overpayments will allow the loan to be paid off quicker and there is the facility to borrow back overpayments at any stage.

Offset mortgage

Offset mortgages link your savings accounts and/or current accounts with your mortgage. The value of the accounts effectively reduces the overall mortgage amount meaning the interest payments are reduced.  If however the money is moved from these accounts the mortgage debt would increase and therefore the interest payments would increase.

Variable rate mortgage

A variable mortgage tracks the standard variable rate (SVR) of the lender. As the SVR fluctuates then the variable rate will adjust accordingly.  This type of mortgage is a standard mortgage and in many cases the above deals will revert to this type of mortgage for the rest of the term.

Once a decision has been made as to which mortgage type is most suited as well as how the loan is to be paid off it is time to research the best deals currently on the market.