Choosing a mortgage can become very time consuming. Mortgage lenders offer a wide variety of loan packages. There are different types of mortgages, which have varying interest rates, up-front costs and clauses in the terms and conditions, all of which are subject to change on a regular basis. In order to find the most suitable mortgage to suit your requirements you need to be aware of all of the payment options available to you. With a little background knowledge on the options available, it will help you come to your decision. There are many different types of mortgages, all of which have there own advantages and disadvantages.
Repayment Mortgage A repayment mortgage is the safest and easiest way to make payments on your mortgage. Each month, a proportion of your payment will go towards the capital and the other portion will pay the outstanding interest payment. If you make all of your payments in full and on time, your mortgage is guaranteed to be paid off by the end of the loan term.
Interest Only Mortgage An interest only mortgage allows you to pay the monthly interest accrued on the loan, whilst the principal amount remains outstanding. Along with making a payment on the interest of your loan, you will also make a payment into a savings or investment account. The idea behind this is that at the end of your loan term you have enough money in your savings or investment account to pay off the principal proportion of your mortgage. Your investment may cover the full amount to repay the loan, however you could also incur a short fall against your final payment if your investment doesn’t perform as expected.
Fixed Rate Mortgage A fixed rate mortgage allows you to pay the same rate over a fixed period of time, which has been agreed by yourself and your lender. The type of mortgage allows you to control your monthly expenditure, as you know exactly what your monthly repayments will be. Therefore, you do not need to be concerned about mortgage rate fluctuations, whilst in your fixed period.
Discounted Rate Mortgage A discounted rate mortgage allows you to pay less than the standard variable rate for a set period of time. Your monthly payment will fluctuate with the mortgage market, but it will remain under the standard variable rate for the period of time agreed between yourself and your lender. The advantage of this type of mortgage is that you will save money on the interest payments made towards your loan for the duration of the discounted term.
Adjustable/Variable Rate Mortgage An adjustable or variable rate mortgage has lower mortgage rates, they are tailored to your circumstances and individual needs. An adjustable rate mortgage will save you on overall interest cost, but as the mortgage rate changes your payments may fluctuate.
Re-mortgage A re-mortgage is the process of taking out a new mortgage against your home in order to pay off the balance of your existing mortgage to achieve a better rate. You can either change lenders completely or you can renegotiate with your existing lender.
Buy to Let Mortgage A buy to let mortgage allows you to take out multiple mortgages in order to purchase a number of properties, allowing you to increase your property portfolio. This type of mortgage is useful if you are buying a property with the intention of renting it out. For buy to let mortgages your own income is not taken into consideration, when calculating the payments. They base they amount on the rental income you expect to receive by renting the property out. Please note that the FSA do not regulate most forms of Buy to Let mortgages.
Debt Consolidation Mortgage Taking out a mortgage in order to consolidate your debts may be a good way to pay off a number of high interest debts for example, credit cards, personal loans, overdrafts etc. This allows you to pay off your outstanding debt and now pay a single mortgage payment per month.