Mortgages and the types of mortgage available can be a minefield. Below we have explained some of the more common mortages available. For more information about mortgages why not visit our sister site
Fixed Rate Mortgages Fixed rate mortgages offer a simple and uncomplicated way of borrowing. They tend to be chosen by first time buyers and those who like the stability of a set monthly repayment. Fixed rate mortgages tend to be offered at a slightly higher initial rate than other types of mortgages as the fluctuations of the Bank of England base rates can not always be successfully predicted by lenders
Self-certification mortgages This type of mortgage is for those people who can't prove their income in the usual way. These include the self-employed, contract and freelance workers, people with more than one job, those relying on big bonuses and funds from investments. Those who rely on pensions and maintenance payments
Guarantor Mortgage If a close relative is willing to act a guarantor some mortgage lenders will allow you to borrow more than four times your annual income. So if a parent offers to lend a sum of money it can mean an entry onto the property ladder for the home owner but if the payments become a problem then the guarantor also shares the ultimate responsibility for the debt.
Graduate Mortgage Being over 21 years of age, you must be educated to degree standard from a recognised UK University and provide proof by way of a degree certificate. You must also be employed on a permanent basis having passed any probation period required by your employer.
Interest Only Mortgage This is where repayments are made up entirely of the interest on the loan. When the mortgage term is complete, the capital originally borrowed is still outstanding. To cover the balance, borrowers are advised to make regular contributions into an investment policy alongside their mortgage repayments. This can be arranged by the mortgage provider, most commonly in the form of an endowment mortgage, an ISA mortgage or a pension mortgage
Bad credit mortgage If you have adverse credit there are lenders that will help. You may have past CCJs and these could be stopping you from becoming a homeowner. There are high street lenders willing to look at your case individually so you may not need to speak to a specialist lender. Interest rates may be a little higher but if you have cleaned up your act you should be able to find a lender willing to help.
Buy to let mortgage - looking to rent out the property you are buying then you need a specialist mortgage. The Buy to Let market has really opened up in the last few years with many high street lenders offering products for this market. You may need to pay a higher deposit and the interest rate will not always be so competitive but securing an additional mortgage is certainly possible.
Flexible mortgage - this allows you to be more flexible with your mortgage, you can overpay and underpay to fit in with your lifestyle. A lot of lenders will have a higher interest rate for this type of mortgage.
Let to buy mortgage - A mortgage if you want to buy another house and rent the one you are in, so that you can keep your existing property and rent it out, while purchasing another place to rent.
Key Worker Mortgages The Government sponsored Starter Home Initiative is a Key Worker Scheme designed to allow those in the following sectors to buy a property close to where they work.
• Nurses and other NHS staff
• Teachers in schools and in further education and sixth form colleges
• Police officers and some civilian staff in certain police forces
• Prison service and probation service staff
• Social workers, educational psychologists, planners ( London ) and occupational therapists employed by local authorities
Shared ownership Mortgage This product allows you to buy a share of a property that is sold to you by a housing association. If a property costs £100,000 and you can only afford to buy 50% of it for £50,000 the housing association retains the difference for which it charges you rent. The rent is generally charged as a percentage of the value of the property the housing association still owns and is generally kept as low as possible. If at any time your circumstances change, you can buy a greater share. You can do this until you own the property outright. This is called ‘Staircasing'. You will have to pay the current market rate for each share and this may not be the rate of the original 50% purchase
Self Build Mortgages Many people are choosing to build their dream home and are applying for a self build mortgage that will allow their build programme to progress with money being released in stages. The money for the build is released in a series of stages. These can be fixed or flexible depending on the lender but usually there are five.
The payments are available either at the end of each stage or at the start, that is, arrears stage payments or advance stage payments.
Cashback Mortgages With this particular mortgage you get a single lump sum of money back. This is either at the point that you take out the loan or after the first month's repayment. Usually a percentage of the amount borrowed and it is designed to be an incentive for borrowers who have decided that they will need a cash injection whey they buy a new home. Most of these deals offer around 3% to 4%. It is possible to find deals that will offer as much as 10% but the higher the percentage the longer you are likely to be tied in for.
Base Rate Tracker Mortgages Although most lenders chose to follow the Bank of England's interest rate as far as their own standard variable rate (SVR), they do have the right to change it. Base Rate Tracker Mortgages bypass this by mirroring exactly any changes to the base rate, whereas variable rate mortgages follow the SVR.
The interest on the mortgage is charged as a set percentage. This would normally be between 1 and 2 per cent above the base rate and remains constant for the period of the mortgage term. The can revert to the SVR at any point during the life of the loan, unless it is stated the tracker will only run for a set period of time at the outset.
Remortgaging Taking out a remortgage can be a good thing if you are on a variable rate mortgage and think interest rates are about to rise. It is a good way to raise funds if you have owned your property for a few years as it could be worth more than your outstanding debt.
You should also be aware that you may have to pay a penalty to release yourself from your old one.
Some lenders impose redemption penalties if you repay your loan early or switch to another lender during a set period. This can be the case if you have taken a discounted or fixed rate loan where you can be tied in during the special deal or even years after it has finished.