At the start of your mortgage journey, you may be unaware of the many types of mortgage available to you. Whether you are a first time buyer in Chester, looking to move home or remortgage, there are plenty of options available.
If you are wondering what types of mortgages are available and are looking for one that will suit your situation, we have compiled a list of the different types of mortgages on offer along with educational videos.
For further information regarding any of the mortgage options listed below, please get in touch to a knowledgeable mortgage broker in Chester today. Our team will be able to answer any of your questions and help you pick the most suitable option.
With a fixed rate mortgage, you will find that your mortgage payments will remain constant for a certain period of time. You can choose the duration of time you want to fix your payments, with popular choices ranging from two to five years, or sometimes even longer.
Many people go for this type of mortgage as our mortgage payments will not change regardless of if there is fluctuations in inflation, interest rates or the economy. This can be beneficial for many with their mortgage payments being their biggest financial obligation.
This can provide peace of mind and stability for homeowners, making it simple to manage their finances in the future.
A tracker mortgage is when the interest rate you pay is linked to the Bank of England’s base rate so it’s not determined by you or the mortgage lender. This will result in your interest rate changing if the base rate changes.
Generally, a tracker mortgage will be set at a certain percentage above the Bank of England base rate. For example, if the base rate is 1% and your tracker rate is 1% above the base rate, your interest rate will be 2%. If the base rate changes, your interest rate will also adjust accordingly.
Even though the interest rate on a tracker mortgage can go up or down, it can be suitable option for those who want to take advantage of any potential rate drops. With that in mind, remember that the base rate increases, so will your mortgage payments, which could impact your finances.
If you are on a repayment mortgage, you will need to make monthly payments that include both capital and interest. As long as keep up with the payments, you will have paid off the full mortgage amount at the end of the term.
This is one of the safest mortgage options if you are looking to repay the capital borrowed from the mortgage lender. In the initial years of the mortgage term, a lot of the payments will go towards interest and the balance will decrease slowly, especially if the mortgage term is over 25, 30 or 35 years.
Further into your term, more of your payments will go towards reducing the capital balance. When you are in the last decade of your mortgage term, your payments will go towards paying off the capital allowing you to reduce your balance quicker.
Interest only mortgage used to be a popular option for homeowners and have become last common in recent years, especially in the residential market.
An interest only mortgage is usually offered to those looking to get a buy to let mortgage, however, it can be difficult for this type of mortgage to be used on residential properties.
When it comes to offering interest only mortgages, mortgage lenders have usually steered away from it. This is because of the potential risks involved, however, it can still be a good option for some.
For instance, if you plan to downsize in the future or have other investments that you can to repay the capital, this is where an interest only mortgage can be beneficial. It’s key to remember that mortgage lenders have tightened their criteria when it comes to offering interest only products.
Loan to value ratios are generally a lot lower than they were before, and mortgage lenders are stricter in their affordability assessments to see whether the borrowers can repay the loan at the end of the term.
With this in mind, we do strongly recommend speaking to an expert mortgage broker in Chester to explore whether an interest only mortgage is the most appropriate option for your circumstances.
An offset mortgage is when the mortgage lender makes a savings account which is linked to your mortgage account.
If you have a mortgage balance of £80,000, and £20,000 is deposited in your savings account, you will be required to pay on the difference between the two which results in £60,000 in this case.
This type of mortgage can be a helpful way to manage your finances, particularly if you pay a higher rate of tax.