Different types of mortgages - Protected.co.uk

Different types of mortgages

Repayment mortgages
A repayment mortgage means that you progressively pay off the amount you borrowed to buy your home.
Initially, it’s just the interest that’s paid off as part of your monthly payments, with the full amount you borrowed being paid off gradually.
This type of mortgage guarantees that all the money you borrowed is paid off by the end of the policy term.

Interest-only mortgages
With an interest-only mortgage, you only pay the accrued interest each month.
This means that your monthly payments will be low, but you won’t be paying back the capital you borrowed to purchase your property.
You’ll need to make further arrangements to pay back the capital in the form of stocks and shares or other personal investments and products.

Fixed-rate mortgages
A fixed-rate of interest is set for an initial period of time, normally 2 or 5 years.
Your repayments will remain the same for this period, with the rates then changing to be in line with your mortgage provider’s current rates.
At the end of the initial fixed-rate period, you may want to compare other rates to ensure you receive the best value deal.

Tracker mortgages
Interest rates are linked to the Bank of England base rates with tracker mortgages. This means that as the base rate changes over time, so will your monthly payments.
If you wish to get a different mortgage before the end of the tracker term, you may be liable to an early repayment fee.

Standard variable rate mortgages (SVR)
This kind of mortgage refers to the lender’s typical rate of interest.
The variable rates are set by the individual lenders, and can change over time depending on how the Bank of England’s base rate adjusts.

Discounted mortgages
This mortgage offers an interest rate below the lender’s standard variable rate (SVR). The discounted rate is usually available for two to five years, after which the rate payable will most likely be the SVR of your lender.
You may be liable to an early repayment fee if you wish to switch mortgages.

Offset mortgages
These plans work by offsetting your personal savings against your mortgage. This helps to reduce the total interest you will need to pay.
An offset mortgage often allows homeowners to pay off their mortgages quicker, but is generally reliant on the person having a substantial amount of savings.