When you start out looking for a mortgage, you will soon understand that there are lots of different options available. Ranging from mortgages for first time buyers in Birmingham to home movers in Birmingham, or remortgages in Birmingham, there is a whole array to select.
In this article, you will see a list alongside a video 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 contact us.
A Fixed Rate Mortgage means that your mortgage payments are going to stay the same for a set period. You can set the length of which you want to fix your payments for, typically, this being two, three, or five years or longer. No matter what happens to inflation, interest rates or the economy you know that your mortgage payment, usually your biggest outgoing, will not change.
A Tracker mortgage means that your interest rate will track the Bank of England’s base rate. So, in other words, the lender that you are with does not set the rate themselves. 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%.
When you take out a repayment mortgage, this means each month you are paying capital and interest combined. So if you keep your payments going for the full length of the mortgage term, the mortgage balance is guaranteed to be paid off at the end and the property becomes yours.
This mortgage type is the most risk-free way to pay your capital back to the lender, in the early years it is mainly the interest that you are paying and your balance will reduce very slowly especially if you have taken out a 25, 30 or 35-year term. This situation switches in the last ten years or so of your mortgage, where your payments are paying off more capital than interest and the balance will come down much faster.
While many mortgages connected to Buy to Let in Birmingham remain set up on an interest-only basis, it is much more difficult to get a residential property on an interest-only basis. It is much less likely for lenders to offer an interest-only product now.
However, there are certain circumstances where this can be an option. These 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 back in the day.
With an Offset Mortgage, the lender will set you up a savings account to go alongside your mortgage account. How this works is that 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, so in this case, £60,000. It can be a very efficient way of managing your money, especially if you are a higher rate taxpayer.