Mortgage Advice in Worcester

At the start of your mortgage journey, you may feel a little overwhelmed with the large variety of options available. There are mortgages for first time buyers in Worcester, people looking to move home and looking to remortgage options as well as many more.

Below we have compiled a list of the different types of mortgages accompanied by helpful videos to give you further understanding.

If you are looking for more information regarding any of the mortgage types mentioned below, don’t hesitate to get in touch with an expert mortgage broker in Worcester. Our team will be happy to provide you with further information to help you make the best decision.

The Different Types of Mortgage in Worcester:

What is a fixed rate mortgage?

If you decide to go for a fixed rate mortgage, your mortgage payments will stay the same throughout the set mortgage period. It’s your choice on how long you want to fix in your payments for, with many choosing between two to five years or sometimes even longer.

The reason why this can be a popular option is that your mortgage payments will not be impacted by inflation, interest rates or the economy which can be helpful for those who are managing a big financial commitment like a mortgage.

This, in turn, can provide stability and predictability for homeowners so it’s easier to manage their finances.

What is a tracker mortgage?

A tracker mortgage is a type of mortgage where the pay is linked to the Bank of England’s base rate and it’s not determined by you or the mortgage lender. Therefore, if the base rate changes, so will your interest rate.

Usually, a tracker mortgage will be set at a certain 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 changes, your interest rate will also fluctuate accordingly.

Even though the interest rate on a tracker mortgage can go up or down, it can be the best option for those who want to utilise this for any potential rate drops. With this in mind, if the base rate increases, your mortgage payments will follow which could negatively impact your finances.

What is a repayments mortgage?

A repayment mortgage is when you are making monthly payments that include both capital and interest. By doing this, our team 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 best way to repay the capital borrowed from the mortgage lender. Within the initial years of the mortgage term, your payments mainly go to paying off the capital meaning you can reduce your balance faster.

What is an interest only mortgage?

There was a point in time when interest only mortgages were a popular option for homeowners and have become less common in recent years, especially in the residential market.

Buy to let mortgages may still be offered on an interest only basis, however, it can be difficult to find this type of mortgage for residential properties.

Mortgage lenders have become more an more cautious when offering interest only mortgages because of the potential risks involved. It may be an appropriate option in certain circumstances.

For instance, if you are thinking of downsizing 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 good to keep in mind that mortgage lenders have tightened their criteria significantly when it comes to offering interest only products.

Typically, loan to value ratios are a lot lower than they use to be, and mortgage lenders are more rigid in their affordability assessments to make sure that the borrowers can repay the loan at the end of the term.

With this in mind, we do strongly recommend speaking to an expert mortgage broker in Birmingham to discuss whether an interest only mortgage is appropriate for your circumstances.

What is an offset mortgage?

An offset mortgage is when a mortgage lender creates a savings account for you, which is linked to your mortgage account.

In the case where you have a mortgage balance of £80,000, and £20,000 is deposited in your saving account, you will only pay interest on the difference between the two, which £60,000.

An advantage of this mortgage can be an effective way to manage your finances, especially if you pay a higher rate of tax.

Trusted Mortgage Advisor in Worcester

Date Last Edited: December 6, 2023