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Different Types of Mortgages Available in Wolverhampton

Mortgage Advice in Wolverhampton

At the beginning of your mortgage journey, you may find yourself overwhelmed with the wide variety of options available to you. From mortgages tailored for first time buyers in Wolverhampton, to mortgages designed for those who are moving home or looking to remortgage, there are lots of options.

To help make the decision-making process a bit easier, we have compiled a selection of free information and accompanying videos detailing the most popular types of mortgages available in the market.

If you find yourself with any further questions about any of the mortgage options listed below, please don’t hesitate to reach out to an expert mortgage broker in Wolverhampton today. They will be happy to assist you and help you make an informed decision.

The Different Types of Mortgages in Wolverhampton:

What is a fixed rate mortgage?

If you opt for a fixed rate mortgage, your mortgage payments will remain constant for a predetermined period. You have the flexibility to choose the duration of time you want to fix your payments for, with popular options ranging from two to five years, or sometimes even longer.

The advantage of a fixed rate mortgage is that regardless of fluctuations in inflation, interest rates, or the economy, you can rest assured that your mortgage payment, which is often the most significant financial obligation, will not unexpectedly change.

This provides stability and predictability for homeowners, making it easier to manage their finances and plan for the future.

What is a tracker mortgage?

With a tracker mortgage, the interest rate you pay is linked to the Bank of England’s base rate, and it’s not determined by you or the mortgage lender. This means that if the base rate changes, so will your interest rate.

Typically, a tracker mortgage will be set at a certain percentage above the Bank of England base rate. For instance, if the base rate is 1% and your tracker rate is 1% above base rate, your interest rate will be 2%. As the base rate changes, your interest rate will also adjust accordingly.

While the interest rate on a tracker mortgage can go up or down, it can be a good option for those who want to take advantage of any potential rate drops. That said, it’s worth noting that if the base rate increases, so will your mortgage payments, which could put a strain on your finances.

What is a repayment mortgage?

A repayment mortgage involves making monthly payments that include both capital and interest. By doing this, you are assured that you will have paid off the full mortgage amount at the end of the term, as long as you keep up with the payments.

This type of mortgage is the safest way to repay the capital borrowed from the mortgage lender. During the initial years of the mortgage term, a greater proportion of your payments goes towards interest, and the balance will decrease slowly, especially if the mortgage term is over 25, 30, or 35 years.

As the term progresses, more of your payments go towards reducing the capital balance. In the last decade of the mortgage term, your payments go primarily towards paying off the capital, allowing you to reduce your balance faster.

What is an interest only Mortgage?

Although interest only mortgages were once a popular choice for homeowners, they have become less common in recent years, particularly in the residential market.

While some 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 when offering interest only mortgages due to the potential risks involved. There are still some circumstances where it may be a viable option.

For example, 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 important to note that mortgage lenders have tightened their criteria significantly when it comes to 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 essential to speak to a specialist mortgage broker in Wolverhampton to discuss whether an interest only mortgage is a suitable option for your circumstances.

What is an offset mortgage?

An offset mortgage involves the creation of a savings account by the mortgage lender, which is linked to your mortgage account.

If you have a mortgage balance of £80,000, and £20,000 is deposited in your 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, particularly if you pay a higher rate of tax.

Trusted Mortgage Advisor in Wolverhampton

Date Last Edited: December 6, 2023

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