Purchasing a house is an important milestone in your life and it involves getting a mortgage. There are lots of different types of mortgages a first time home buyer can choose from to find the one best suited for them.
You pay the same interest rate throughout the length of your mortgage contract. However, the interest rates may change due to macro-economic changes. You’ll see these rates advertised as ‘two-year fix’ or ‘five-year fix’, along with the interest rate charged for that period.
However, charges will be incurred should you want to leave earlier than the length of the fixed mortgage term. A better scenario is when you are looking for a new mortgage deal two to three months before the current mortgage agreement ends. Your lender or if you switch lenders, you could be moved automatically onto your lender’s standard variable rate, which is usually higher.
This is the regular interest rate your mortgage lender charges homebuyers, and it will last as long as your mortgage or until you take out another mortgage deal.
Changes in the interest rate might occur after a rise or fall in the base rate set by the Bank of England.
This is a discount off the lender’s standard variable rate (SVR) and only applies for a certain length of time, typically two or three years. SVRs differ across lenders and so it is best not to assume that the bigger the discount, the lower the interest rate. A reminder that charges if you want to leave before the end of the discount period.
Your rate moves in line normally with the lender’s SVR. But the cap means the rate can’t rise above a certain level.
These work by linking your savings and current account to your mortgage so that you only pay interest on the difference. You still repay your mortgage every month as usual, but your savings act as an overpayment which helps to clear your mortgage early.
Before picking a mortgage, the homeowner must understand what this means and which one is best for them, seeking out an expert's financial advice is necessary.
For those who buy a property hoping to rent it out rather than living in it, they may opt for a buy-to-let mortgage. Buy-to-let mortgages are usually only offered on an interest-only basis, which means the payments made will only cover the interest of the loan.
This is different from most residential mortgages, as these will cover both the capital, or amount borrowed, and the interest will gradually be paying back the price of the property. To get a quote, choose the type of mortgage you require and our financial advisors will be in contact shortly.