Find the right mortgage for you
Finding the right mortgage deal for you isn’t easy. There are a few different types of mortgage, each with their own advantages and things to consider:
These are the most common types of mortgage – with this type of mortgage you pay the same interest rate for the entire deal, regardless of interest rate changes elsewhere.
Whether a fixed-rate or variable-rate deal is best for you depends on a few factors. The most important things to consider are:
- Whether you think your income will change
- Whether you want to know exactly how much you’ll pay each month
- Whether you could cope if your monthly payments went up
Variable rate mortgages
Variable rate means that the rate of interest you pay back on your mortgage is liable to change. Tracker mortgages and discount mortgages are the two main types of variable rate mortgages.
This kind of mortgage tracks the Bank of England’s base rate. For instance, if the base rate was 0.1% and the additional rate 3%, you’d pay 3.1%.
Approximately one in 10 mortgage customers have a tracker mortgage according to research by Which?
With this type of mortgage, you pay your lender’s standard variable rate, with a fixed amount discounted. If your lender’s standard rate was 4% and your mortgage came with a 1% discount, you’d pay 3%.
Standard variable rate mortgages
Each lender can set this figure at whatever level it wants and it bears no relationship to the Bank of England base rate.
Although they normally don’t change often, lenders can change their standard variable rate at any time. Certain factors influence these changes – for example, they are more likely to change if there are rumours of the Bank of England changing the base rate in the near future.
Most people who have a standard variable mortgage have had their mortgages for over five years, and if you are currently paying standard variable rate it is likely you will be able to save money by remortgaging.
An offset mortgage is where you have savings and a mortgage with the same lender and your cash savings are used to reduce the amount of mortgage interest you are charged. Rather than placing your money in a standard savings account, you place it in an offset account linked to your mortgage.
If you had a mortgage balance of £100,000 and offset £20,000 in savings, you will only be charged interest on £80,000.
Joint Borrower, Sole Proprietor (JBSP)
JBSP mortgages are a type of mortgage where not all parties to the mortgage are the legal owners of the property. For instance, if there are two borrowers in this scenario, both will be liable for the mortgage but only one will be named on the title of the property.
These mortgages allow parents, guardians, friends or family to support would-be first time buyers with the affordability challenge of getting on the housing ladder.
Mortgage for a Concessionary purchase
A concessionary purchase is a term for a property that is bought for less than its market value.
Let’s say that this property is worth £150,000 but your parents want to sell it to you for a discounted price of £120,000. The surplus of £30,000 would then act as your deposit.
Your home may be repossessed if you do not keep up repayments on your mortgage.