Finding a mortgage lender and securing a loan is not straightforward. With the wide range of mortgage types available today, you will find it challenging to choose the right one. First, you should decide which type of mortgage to get, whether it is discounted, tracker, fixed, interest-only, etc. Knowing which one suits you will depend on your circumstances. An error in judgment could be costly.
Making a shortlist of the mortgage types that fit your finances will help you choose the mortgage product and the lender. Below are examples of some of the more common types of mortgage available. Some of them are straightforward, while others are more complex.
An interest-only mortgage involves repaying the interest first. Then, the borrower pays the equity at the end of the mortgage term.
With this type of mortgage, you repay the interest and equity monthly. This is a more appropriate choice as you ensure that you are paying off your mortgage debt, and you can be sure that by the end of the term, you have paid off your debt in full.
When you have a fixed-rate mortgage, the lender defines the rate for a specific number of years. After that elapsed, the interest rate follows the standard variable rate of the lender. It is a popular mortgage type because it lets you know the exact amount you need to pay monthly for a specific period. In addition, it shields you from rate increases (from two to five years), and you will have some savings. However, the downside of this type is that after the protective period is over, you might pay more because of rate increases.
This early, you can see some mortgage types’ complexities. However, you can understand them better if you seek the advice of an independent financial advisor mortgage near you. You will not only benefit from the financial expertise, but you will also gain from their knowledge of the real estate business in your area and their experience in dealing with various mortgage lenders.
The tracker mortgage works differently from the fixed-rate mortgage. Instead of shielding the borrower from rate increases, it fluctuates alongside the base rate from the Bank of England. So, for example, if the tracker base rate is plus two per cent, the borrower pays two per cent more than the base rate of the Bank of England.
First-Time Buyer Mortgage
You can find mortgage companies that offer special deals for first-time homebuyers. For example, they accommodate lower deposits, and application fees can likewise be lower. In addition, the company usually provides a discount on the mortgage to help borrowers during their initial years. A first-time buyer mortgage can be helpful, but your financial advisor may find something better.
The list gives you a good idea of what each mortgage type includes. You can find the best mortgage by talking to a professional mortgage broker near you, particularly an independent mortgage broker. Also, do some research yourself by talking to your bank or building society.