What are the different types of mortgage? A mortgage that comes with a large arrangement fee can end up costing you more than a mortgage that has a slightly higher interest rate but low or zero fees. In general, when looking for the best mortgage deal, you are looking for the lowest mortgage rate. When you compare mortgages, the advertised mortgage rates are the annual amount of interest that you would be charged. The lower the mortgage rate, the smaller your monthly repayments.
The mortgage rate is the rate of interest charged on a mortgage by the lender - it is the cost of the loan. If you pay off your mortgage over a shorter time, you will have to pay more in each monthly payment (although you will end up paying less overall because there will be less time for the interest charges to mount up). The size of the monthly mortgage repayments is decided by two things: the mortgage term and the mortgage rate. The mortgage term is the agreed time you have to pay it off: this is usually between 25 and 30 years. You then pay back the mortgage (plus interest) in monthly instalments to the lender. The payment is made via your solicitor or conveyancer.
When you buy a home, you pay the seller the full amount, which is made up of your deposit and the money lent to you by the mortgage provider. This means the lender could repossess your home if you do not keep up with the monthly repayments.Īlternatively, the lender could force you to sell it to pay back what you owe. So a bigger deposit can mean that as well as having to borrow less in the first place, the cost of that borrowing is lower, too.Ĭompare mortgage rates for all mortgage types How does a mortgage work?Ī mortgage is a loan secured against your property. If you buy a £200,000 house by putting down a deposit of £40,000 and taking out a mortgage of £160,000, you have a mortgage of 80% LTV – in other words, you have borrowed 80% of the cost of the house.Īs a general rule, mortgages with lower LTVs charge lower interest rates. The relationship between how much you borrow and your deposit is called the loan-to-value ratio, or LTV. You are likely to need a guarantor – someone who uses their savings or their own property as security for the mortgage – to back you with one of these loans. There are a few deposit-free mortgages available, although not as many as there were a few years ago. The typical mortgage term in the UK is 25 years. You pay back the loan (plus interest) over a period of time known as the mortgage term. In most cases, you stump up a deposit of at least 5% of the property price and a mortgage lender (usually a bank or building society) lends you the rest. Is remortgaging the same as getting a mortgage?Ī mortgage is a secured loan made by a lender to help you buy a home.What do I need to get the best mortgage deals?.What are the different types of mortgage rates?.