Guide to mortgages

There are a lot of different types of mortgages available. There are mortgage specifically tailored for types of property ie Shared ownership. There are also mortgages aimed at particular types of people looking for a mortgage ie first time buyers, buy to let, self certification.

Once you get past the various advertised types you will find other differences. Each company packages its mortgages under specific headings (ie First Time buyers) and then provides a specific set of options to that package. These options include : fixed rate, trackers, variable rate, interest only and a host other options.

A brief explanation of a few of the more common mortgage options:

Fixed Rate

With this type of mortgage, you can avoid the uncertainty of possible changes to your monthly payment by fixing the interest rate for a set period of time. This will be agreed at the start of the mortgage. The actual fixed interest rate and period over which it will apply will depend on the terms of the deal you have chosen.

Variable Rate

The interest rate on a tracker mortgage is directly linked to the Bank of England Base Rate. It's set at a certain percentage above it for a set period of time. Any change in the Bank of England Base Rate, up or down, will be reflected in your mortgage rate.

Tracker

This is a variable rate that is linked to the movement of a prevailing rate such as The Bank of England Base Rate or London Interbank Offered Rate (LIBOR). The pay rate will be a set percentage amount above the relevant base rate for a specified period of time. For example if the tracker mortgage is set at 1% above The Bank of England Base Rate for 5 years and the base rate is currently 4.75%, the pay rate will work out at 5.75%.

In addition to this there is another set of options including interest only and repayment mortgages. These mortgage types define how we pay off our mortgage loan, and can have options like fixed rate applied to them.

An interest only mortgage is literally that. Your monthly payment is only enough to repay the mortgage loan interest. The bulk of the loan must be paid of by other means arranged by you. This could be an ISA or other savings scheme.

A repayment mortgages payments are based on repaying the whole loan and at the end of the term the mortgage will be paid off.

You can view numerous mortgages online or see a bank, estate agent, building society or independent mortgage consultant or financial advisor to get advise on which mortgage will best suit your needs.