Different Types of Mortgages Available in Birmingham

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Mortgage Advice in Birmingham

The Different Types of Mortgages in Birmingham

What is a Fixed Rate Mortgage?

What is a Tracker Mortgage?

What is a Repayment Mortgage?

What is an Interest-Only Mortgage?

What is an Offset Mortgage?

Mortgage Advice in Birmingham

In the beginning of your mortgage process, you will quickly become aware that there are lots of different options available to you. Ranging from mortgages for first time buyers in Birmingham to Home Movers in Birmingham, or remortgages in Birmingham, there is a large variety to choose from.

In this article, you will see a selection of free information with accompanying videos, of the most popular types of mortgages available on the market. If you have any further questions regarding any of the below mortgage options, then please do not hesitate to get in touch.

The Different Types of Mortgages in Birmingham

What is a Fixed Rate Mortgage?

A fixed rate mortgage means that your mortgage payments are going to remain consistent for a set period. You are in control of the length you wish to fix your payments for. Popular choices tend to be two, three, or five years, sometimes longer.

No matter what happens to inflation, interest rates or the economy you know that your mortgage payment, often your biggest financial outgoing, will not unexpectedly change.

What is a Tracker Mortgage?

A tracker mortgage means that your interest rate will follow the Bank of England’s base rate, and is not set by either yourself or the mortgage lender.

You will be paying a percentage above the Bank of England base rate. For example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.

What is a Repayment Mortgage?

When you take out a repayment mortgage, this means each month you are paying a combination capital and interest. This means that if you keep your payments going for the full length of the mortgage term, you are guaranteed to pay off your deal in full by the end of your term.

This mortgage type is the most risk-free way to pay the lender back your capital. In the beginning of your mortgage term, it is mainly the interest that you are paying and your balance will go down at a slow rate, especially if you have taken out a term over 25, 30 or 35 years.

Things pick up in the last ten years or so of your mortgage, where your payments are paying off more capital than interest and you will be able to pay off your balance quicker.

What is an Interest-Only Mortgage?

While many mortgages connected to buy to let mortgage in Birmingham can still be set-up on an interest-only basis, it is much more difficult to get that kind of mortgage on a residential. It is much less likely for lenders to offer an interest-only product nowadays, though there are certain circumstances where this can still be viable.

Reasons this may work, include downsizing when you are older or have other investments that you will use to pay the capital back. Lenders are very strict when it comes to offering these products now, and the loan to values is a lot lower than it used to be in days gone past.

What is an Offset Mortgage?

With an Offset Mortgage, the lender will organise a savings account to go alongside your mortgage account. Let’s say you have a mortgage balance of £80,000 and £20,000 remains deposited into your savings account, you only pay interest on the difference, which in this case would be £60,000. It can be a very efficient way of managing your money, especially if you are a higher rate taxpayer.

Date Last Edited: February 19, 2024