Different Types of Mortgages Available in Shrewsbury

Mortgage Advice in Shrewsbury

Starting your journey towards obtaining a mortgage can be daunting, especially with the wide variety of different options available to you. Whether you are a first time buyer in Shrewsbury, looking to move or remortgage in Shrewsbury, the options can be overwhelming.

To simplify the decision-making process, we have compiled a list of resources for you, including videos, to guide you through the most popular mortgage options available in the market. Best of all, these resources are available to you for free.

If you have any additional questions regarding the mortgage options mentioned above, please feel free to contact a knowledgeable mortgage broker in Shrewsbury today. They will be pleased to help you and ensure that you make a well-informed decision.

The Different Types of Mortgages in Shrewsbury:

What is a fixed rate mortgage?

When you choose a fixed rate mortgage, your mortgage repayments will remain the same for a set period of time that you choose. Typically, you can select a term of two to five years, or even longer.

One of the major benefits of a fixed rate mortgage is that your mortgage payments will not be impacted by changes in inflation, interest rates, or economic conditions.

This provides homeowners with a sense of security, knowing that their mortgage payments, which are often a significant financial commitment, will not unexpectedly increase.

With a fixed rate mortgage, homeowners can enjoy financial stability and predictability, which makes it easier to manage their budget and plan for the future.

What is a tracker mortgage?

A tracker mortgage is linked to the Bank of England’s base rate, and its interest rate is not determined by you or your mortgage lender.

Instead, it is typically set at a certain percentage above the 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 will your interest rate.

While a tracker mortgage can offer the potential benefit of taking advantage of any potential rate drops, it’s important to note that your mortgage payments will also increase if the base rate goes up.

As such, this type of mortgage may not be suitable for those who are on a tight budget or have limited flexibility. If you’re unsure whether a tracker mortgage is right for you, it’s best to seek mortgage advice from an expert mortgage broker in Shrewsbury.

What is a repayment mortgage?

Repayment mortgages require monthly payments that cover both interest and capital, ensuring that by the end of the term, the entire mortgage amount is paid off, provided that payments are made on time.

This type of mortgage is considered the most secure way to repay the borrowed capital to the mortgage lender.

In the initial years of the mortgage term, a larger portion of the payments goes towards interest, resulting in a slow decrease in the outstanding balance, particularly for mortgages spanning 25, 30, or 35 years.

As the mortgage term progresses, more of the payments are allocated to reducing the capital balance. In the final decade of the term, the payments are primarily directed towards paying off the capital, enabling the borrower to reduce their outstanding balance more quickly.

What is an interest only mortgage?

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

While some buy to let mortgages may still be available on an interest only basis, finding this type of mortgage for residential properties can be challenging.

Mortgage lenders have become increasingly cautious when offering interest only mortgages due to the potential risks involved. That said, there are still some situations where it may be a viable option.

For instance, if you plan to downsize in the future or have other investments that you can use to repay the capital, then an interest only mortgage may work for you.

It’s worth noting that mortgage lenders have significantly tightened their criteria for offering interest-only products.

Loan-to-value ratios are typically much lower than they used to be, and mortgage lenders are much stricter in their affordability assessments to ensure that borrowers can repay the loan at the end of the term.

Therefore, it’s important that you speak with a specialist mortgage broker in Shrewsbury to determine whether an interest only mortgage is a suitable option for your circumstances.

What is an offset mortgage?

An offset mortgage is a type of mortgage that involves the mortgage lender creating a savings account that is linked to your mortgage account.

With an offset mortgage, the balance in your savings account is used to offset the outstanding mortgage balance. For example, if you have a mortgage balance of £80,000 and £20,000 in your linked savings account, you will only pay interest on the difference between the two, which is £60,000 in this case.

This type of mortgage can be an effective way to manage your finances, especially if you pay a higher rate of tax. It allows you to use your savings to reduce the amount of interest you pay on your mortgage, which can result in significant savings over the life of the mortgage.

Trusted Mortgage Advisor in Shrewsbury

Date Last Edited: December 6, 2023