The type of mortgage you go for will rely heavily on your financial circumstances. And there are many different types out there, so it can be confusing to know which is best for you.
If you’re unsureabout the differences between the types of mortgage, or it’s your first time looking into mortgages and want to know more, this guide will go into detail to help you understand what will be best for your circumstances.
From 95% mortgages for first-time buyers, to what Standard Variable Rate means,read this blog for more information on the types of mortgages.
With a fixed-rate mortgage, your monthly payments won’t fluctuate. Your payments stay the same, or fixed, every month so you’ll know exactly how much you’ll be paying. This can last between two and 10 years. When the fixed period ends, you’ll usually go to a variable-rate mortgage, but you can discuss this with your lender prior to this.
This can be helpful as even if interest rates increase, you won’t pay extra. However, if they fall, you’ll still be paying the same.
With variable-rate mortgages, or Standard Variable Rate (SVRs),the interest rates can change. This is usually when the Bank of England’s interest rates change. These can be some of the most expensive types of mortgages, so you should look into other options when your fixed-rate mortgage is coming to an end.
Tracker mortgages follow national interest rates, so your loan rises and falls alongside it. For example, SVRs are a type of tracker mortgage and will most likely follow the Bank of England base rate with a percentage added to it.
For first-time buyers, 95% mortgages are available to help get you on the property ladder. This meansyou can get a mortgage with just a 5% deposit instead of the usual 10%+.Many first-time buyers struggle the most with getting a deposit together, so this is a great chance to buy a first home.
Using a Help to Buy or ISA account to get a first-time mortgage can also work in buyers’ favours. They can offer help from the government as well as 5% deposits.
A buy-to-let mortgage refers to the mortgage you require to rent out a property. The mortgage will depend on how much you expect to gain from the rent, as well as your salary and personal finances.
If you have never owned a property before, it will be difficult to get accepted for a buy-to-let mortgage. However, it’s still possible if you get in touch with a specialist broker.
A let-to-buy mortgage is for those who wish to rent out the home they’re living in currently and buying a new property to move to. For this, you will need two mortgages – one for your current home and one for your new house. This can become complicated, so it’s key to find a professional mortgage advisor to help.
For those with bad credit history, previous debt or are newly self-employed, you may need a specialist mortgage. Having a poor credit history can lead to mortgage rejections, so a specialist mortgage advisor is required to help avoid this. Specialist advisors will have lenders on their books who are happy to lend to those with a history of bad credit or those who are newly self-employed.
Another type of specialist mortgage is a guarantor mortgage. This allows family members to guarantee your loan to get you on the ladder. You will need to speak with a specialist mortgage broker for this.
Find the Mortgage for You
Picking the right mortgage for you will depend on your financial situation, whether you’ll be living in the property or renting it, whether it’s your first mortgage or you’re looking to change lenders.
Speaking to a professional is paramount to getting the right advice as to what’s best for you. Hopefully thisarticle has helped unravel some of the differences between the types of mortgage options out there.