Different Types of Mortgages Available in Tamworth

Mortgage Advice in Tamworth

If you’re a first time buyer in Tamworth, it may seem like the world of mortgages is a minefield, however, it really isn’t! Having a mortgage broker by your side can make your experience in the mortgage straightforward and most importantly less stressful.

When you are looking for a new mortgage in Tamworth, it is important to know your options so that you can get an idea of how your repayments will work. There are many mortgage options available and it is part of our job, as your mortgage broker in Tamworth, to help you find the best option for you.

The Different Types of Mortgages in Tamworth:

Here we explore the different mortgage options available to you as a mortgage applicant in Tamworth. Some of these options will be more beneficial to you than others, therefore, it is important to assess all of your options.

Our managing director Malcolm Davidson has dedicated a YouTube channel surrounding mortgage news and market updates; below you will find a useful explainer video for each type of mortgage.

What is a fixed rate mortgage?

Opting for a fixed rate mortgage ensures that your mortgage payments remain unchanged during the designated mortgage period. You have the flexibility to decide on the duration of the fixed payments, commonly ranging from two to five years or even longer.

The advantage of this approach is that inflation, interest rates, or economic fluctuations will not affect your mortgage payments. This feature can be particularly beneficial for individuals who are handling a significant financial obligation such as a mortgage.

As a result, fixed rate mortgages offer homeowners stability and predictability, enabling them to better manage their finances.

What is a tracker mortgage?

A tracker mortgage is a type of mortgage that tracks the Bank of England’s base rate and is not determined by either you or your mortgage lender. Therefore, any changes to the base rate will impact your monthly repayments and interest rates.

Typically, a tracker mortgage is set at a specific percentage above the Bank of England base rate. For example, if the base rate is 1% and your tracker rate is 1% above the base rate, your interest rate will be 2%. As the base rate fluctuates, so too will your interest rate.

Despite the possibility of your interest rates rising or falling, it can be an attractive option for those looking to take advantage of any potential rate drops. It’s important to note that if the base rate increases, your mortgage payments will also rise, which may have an adverse impact on your finances.

What is a repayments mortgage?

A repayment mortgage is a mortgage in which you make monthly payments that cover both the capital and interest. By doing so, you can be certain that you will have fully paid off the mortgage amount by the end of the term, provided that you make all the payments on time.

This type of mortgage is the most effective way to repay the borrowed capital from the mortgage lender. During the early years of the mortgage term, a larger portion of your payments will be allocated to paying off the capital, allowing you to reduce your balance more quickly.

What is an interest only mortgage?

Interest only mortgages were once a popular choice for homeowners, but they have become less prominent in the market in recent years, particularly in the residential market.

While buy to let mortgages may still be offered on an interest only basis, it can be challenging to find this type of mortgage for residential properties. Mortgage lenders have become increasingly cautious about offering interest only mortgages due to the potential risks involved. Nonetheless, an interest only mortgage may be a suitable option in specific circumstances in Tamworth.

For example, if you plan to downsize in the future or have other investments that you can use to repay the capital, an interest only mortgage may be a viable choice. However, it’s important to keep in mind that mortgage lenders have tightened their criteria considerably when it comes to offering interest only products.

Typically, loan to value ratios are much lower than they were before, and mortgage lenders are stricter in their affordability assessments to ensure that borrowers can repay the loan when it is due. Therefore, we strongly recommend speaking to a knowledgeable mortgage broker in Tamworth to assess whether an interest only mortgage is appropriate for your individual circumstances.

What is an offset mortgage?

An offset mortgage is a type of mortgage in which the mortgage lender establishes a savings account for you that is linked to your mortgage account.

Suppose you have an outstanding mortgage balance of £80,000, and you have deposited £20,000 into your savings account. In that case, you will only pay interest on the remaining balance of £60,000.

One advantage of taking out this type of mortgage in Tamworth is that it can be an efficient way to manage your finances, especially if you are subject to a higher tax rate.

Trusted Mortgage Advisor in Tamworth

Date Last Edited: December 6, 2023