Mortgage Types Explained

state of the industry

Thanks to the current state of the housing market there has never been a better time to buy, but while the mortgage industry recovers, finding the right mortgage is becoming more difficult all the time.

This is why using an independent mortgage adviser can save you valuable time and more importantly money.

first-time buyer

In today's economic climate first-time buyers face a real struggle to take those first steps on the property ladder.

Mortgage products are becoming scarcer, meaning that lenders are becoming anxious and more careful when it comes to whom they borrow money to. Many mortgage lenders are on the lookout for a more substantial deposit from first-time buyers than in recent years, to show they are committed to the deal.

Also, a strong credit rating is paramount during these recessional times. Creditors aren't very likely to lend you anything unless your credit rating is to a good standard. Check your credit history with one of the online services to make sure there are no unnecessary blemishes on your rating.

interest only mortgages

The second kind of our mortgage types explained are Interest Only Mortgages, to coin a phrase Interest Only Mortgages do exactly what they say on the tin. For an agreed fixed term, you can repay only the interest on the loan.

In times of financial hardship, this type of deal can help you pay off your debt or just be relieved of large mortgage payments for a limited period. There are some providers who offer this facility to those who are struggling to make ends meet.

fixed-rate mortgages

A fixed-rate mortgage is a loan that allows you to keep the same rate of interest through the repayment term. During the UK recession, the number of fixed-rate mortgages approved has decreased, this means it is much harder to obtain one and you are more likely to require a large deposit (as large as 40%).

Fixed-rate mortgages are for the kind of people who like to have stability; the interest rate does not change with market forces. By taking out a Standard Variable Rate mortgage (SVR) your monthly payments can rise or fall from month to month dependent on the lenders interest rates.

tracker mortgages

The last of our mortgage types explained is the tracker mortgage, this is a variable mortgage and as such follows or 'tracks' the Bank of England's base-rate.

Recently, the Bank of England's base-rate has been at an all time low, this means that some people are paying virtually nothing on their mortgage repayments. This is only a short-term advantage, because when the economy eventually recovers the BOE base-rate will increase once more and this in turn will mean higher mortgage repayments.