Types of Mortgage
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Buying a property is one of the biggest commitments - and the biggest investments - that you are every likely to make. To help you with your important purchase there is now a wide range of UK lenders offering a variety of UK mortgage deals to suit just about every type of borrower. Whether you are a first time buyer, a wannabe landlord or are simply moving home, you will want to ensure that you find the right lender for your needs, and that you can the deal that offers the best value for money. The vast choice of lenders and mortgage packages out there can make this quite difficult and confusing, particularly if you have no experience with mortgages and financial jargon. The dramatic boom in UK house prices over recent years has seen many people shy away from buying property through fear of not being able to get a mortgage or afford the repayments. However, mortgage providers have taken the rise in property prices into consideration, and many now offer far higher borrowing levels and far longer repayment periods. This enables people to buy the property they want, and still keep the monthly repayments down. Plus the range of specials packages, some of which are listed below, can also help to make a mortgage more affordable. 100% mortgagesThese are generally offered to first time UK buyers with a good credit rating. If you don’t have enough of a deposit to get your foot on the property ladder, this sort of mortgage can be a big help. However, one thing to be wary of is getting into negative equity, which could happen should the value of your home fall early on in the life of the mortgage.Adverse credit mortgagesThese mortgages are designed for those with tarnished credit histories or a poor credit rating, and can provide a solution that was not available in previous years. Until recently UK lenders wouldn’t look twice at those with a poor credit history. However, with the rise in consumer debt and an increase in the number of people affected by bad credit, lenders quickly realized that they were missing a large portion of the UK market. This is when sub-prime lenders appeared on the scene, and these lenders provide an effective solution to poor credit history borrowers and those that are unable to prove their income. The interest rate may be slightly higher than the standard rate with sub-prime lenders.Variable rate mortgageThis is a standard mortgage, where the interest rate rises and falls in line with the Bank of England base rate. This is great when the UK base rate is low, as the interest rate on the mortgage will also be low, thus making the monthly repayments more affordable. However, you should bear in mind that the UK base rate can also rise - and on occasion has risen very steeply - which can cause problems for many people who find that they can suddenly no longer afford their repayments.Fixed rate mortgagesThese mortgages offer a fixed rate for a certain time period, usually between two and five years. The rate is fixed slightly above the UK base rate, so your repayments will initially be higher. However, the advantage is that should the base rate in the UK rise, your mortgage repayment will remain static. A fixed rate mortgage makes budgeting far easier, as your repayments will be the same each month no matter what happened with the interest rate.Capped rate mortgagesThis is a combination of a fixed rate and a variable rate mortgage. Capped rate mortgages offer some key benefits to UK residents. The main advantage is that there is a ceiling limit on how high your interest rate will go, and no matter how high the UK base rate or the UK lender’s variable rate goes, your rate will not exceed this ceiling limit throughout the period that the capped-rate applies. However, if the base rate or the variable rate goes down, your rate will also go down. So capped rate mortgages offer the advantages of a variable rate mortgage with the peace of mind of a fixed rate.Other mortgages to considerThere are many other mortgage types available in the UK these days, including:
Have a look at our mortages page to find some of the best uk mortgages on offer today. |
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types of mortgage