When it comes to mortgages, there are more than you might think.
We aren’t just talking about all the different lenders available, but also the various types of mortgage available. When thinking about purchasing a property have you thought about a Tracker mortgage? A Buy-to-Let mortgage? A Home Mover Mortgage? A First Time Buyer Mortgage?
While there are a lot of different mortgage types and rates to consider, as long as you do your research, you should be fine. As one of your most significant financial commitments making sure you’re choosing the right kind of mortgage is crucial, or you may end up in trouble down the line. Luckily there are a few things you can do make sure you have the best deal. From making sure you’ve covered all costs, to using an online mortgage broker, to talking to a professional, there are plenty of things you can do to get yourself the best mortgage product possible.
Let’s take a look at different types of mortgages and what you can do to find out if it’s the right one for you.
Standard Variable Rate
SVR is a lender’s standard rate with no extras included. There isn’t technically a mortgage simply called an ‘SVR mortgage’ as it just refers to a lenders standard rate once it’s out of a deal period. However, since it’s a deal you could end up with once a previous deal you have has expired, you should become familiar with the standard rate your lender offers as each lender can set their own rate and change it however, they like.
New Build Mortgages
A New Build home is basically what it says on the tin: a newly built property that you will be the first to live in.
These types of properties can seem very attractive to many home buyers as everything about the property will be new and you won’t have to worry about any trouble left by the previous tenants, plus repairs should be quite minimal in the first few years. If it’s been built to the proper standard, it should be running efficiently enough so you can enjoy lower energy bills.
Enjoying a blank canvas of a property, you’d be surprised how affordable these homes can be. Working directly with from a builder/building company, you’ll be able to find deals not available to from another homeowner.
If you’re interested in a new build mortgage, make sure to do your research properly. While these deals can be great, you have to be careful. Make sure to get to know the potential developers and have a look at any other work they’ve done previously. Never solely rely on any promotional material. See what you’ll really be getting into by checking facilities near the site, available transport, the neighbourhood etc.
This is one of the most common types and what people usually think of when they hear the term ‘mortgage.’ With this type of mortgage product, you’ll gradually pay back what you’ve borrowed along with interest on whatever remains throughout your deal. The amount left to pay is sometimes referred to as ‘the capital’ which is why these types of deals can be referred to as interest or capital mortgage deals.
Fixed Rate Mortgage
This can be an attractive deal for many as, the mortgages guarantee that your interest rate will stay the same for a set amount of time, usually ten years. However, once this period is up, you will be switched back to the lender’s default or standard variable rate.
While that might not sound as good, that can make a great time to remortgage. While a mortgage is a long investment, it doesn’t mean you are trapped in the same deal forever. When your interest rate starts coming to an end, it makes the perfect time to shop around for other deals, so your repayments don’t suddenly skyrocket!
With this type of loan, you won’t pay off any of the mortgage, only the interest it earns. While your monthly payments will be lower than some other mortgage deals, keep in mind that you aren’t actually paying off any of the loan and at the end of the term you will have to come up with the amount in full.
Many people choose this particular loan so they can invest their mortgage and use that to pay off the full amount when it comes to the end of the term.
These types of mortgages don’t stick to one rate, instead following the Bank of England base rate so you’ll be paying a different amount each month with a fixed rate on top. For this type of mortgage, make sure to check how the base rate has changed over the past year and any possible predictions for the future, so you aren’t going in completely blind.
Finding the Right Mortgage
With all these mortgage options, it can be tricky trying to decide which one can work best for you. Luckily, there are plenty of steps you can take to make sure you find the best deal.
Covering all costs. One thing you should do first is to make sure you’ve covered all your costs. Not only will you need money for a deposit, but you’ll also need to make sure you know how much you’ll be paying in Stamp Duty, Building’s Insurance, Life Insurance, Moving Costs etc. You don’t want to end up in financial trouble before you’ve even set foot in your new property!
Online Mortgage Broker: An online mortgage broker is a great tool to see what kind of deals you may be accepted for. Usually, you just need to put in a few details like your budget and whether you’re a first-time buyer or not and it will search through thousands of deals on the market to find the best ones for you. These services are usually free and, unlike a bank or building society, will have a much wider resource of mortgages to search through.
Physical Mortgage Broker. If you want a more in-depth look, then switch from an online mortgage broker to a physical one. While in-person mortgage brokers will usually charge a fee for their service, they can help if you have a more complicated situation, would like your application processed further or would like info on other areas: Stamp Duty, Insurances etc.
When it comes to finding the right mortgage, ultimately, it’s different for each person and situation. Any type of mortgage will be a substantial financial commitment, so making sure you do all you can to find the right deal isn’t something that should be taken lightly.