What You Need To Know About Uk Mortgages

If you do not have much experience with mortgages, then it would benefit you to educate yourself before deciding whether or not to refinance a current mortgage or to buy a new home. Educating yourself on mortgages in the UK can benefit you when it comes to finding the right mortgage terms for your individual situation.

Types of Mortgages

Endowment Mortgage - This is an interest-only mortgage which involves repayment of capital using an endowment policy at the end of the mortgage's term.

Interest-Only Mortgage - With an interest-only mortgage, the capital part of the loan is not repaid until the end of the mortgage term.

Investment Backed Mortgage - This is an interest only mortgage which uses a PEP, ISA or some other investment plan to repay the capital at the end of the mortgage's term.

Pension Mortgage - With a pension mortgage, interest-only mortgages are repaid at retirement using a personal pension scheme's tax-free cash lump sum.

Repayment Mortgage - This is a method for mortgage repayment which involves paying both the interest and the capital.

Types of Interest Rates

Capped Rates - A Capped rate is similar to a fixed rate, as there is a cap which prevents the interest rate from rising, however the rate can vary as long as it stays below the cap. Some capped rates also have collars, which impose a minimum rate as well as a maximum rate.

Discount Rates - Discount rates exist when there is a significant reduction of the standard variable rate for a set period of time which generally ranges from one to five years.

Fixed Rates - A fixed rate is a rate which remains constant for a set period of time, which is typically two, three, four, five or ten years. The longer-term fixed rates such as five and ten year are generally more expensive and less popular than the shorter term fixed rate loans.

Standard Variable Rate - This is the default variable rate which is offered to every mortgage borrower.

Tracker Rate - This is a variable mortgage rate which is linked to a public interest rate based on a predetermined margin. This rate is commonly linked to the LIBOR for most borrowers.

Variable Rate - this is a rate which varies solely based on the discretion of the lender.

Other Types of Mortgages

Adverse Credit Mortgage - This is a mortgage for borrowers who have credit problems.

Buy to Let Mortgage - this is a mortgage placed on residential property which is let to tenants.

Deferred Interest Mortgage

Foreign Currency Mortgage - Debt is transferred into a foreign currency in order to reduce interest payments and capital based on exchange rate fluctuation.

Flexible Mortgage - This mortgage allows for additional payments of capital without a penalty.

Let and Buy - This mortgage allows you to let your existing property in order to buy a new property.

Non-Status Mortgage - This is a mortgage where the applicant's income does not come into play.

Offset Mortgage - This is a mortgage where the interest can be reduced by offsetting a credit balance.

Understanding the UK mortgage market and various offers available to you can seem daunting. But do not be put off by researching what is the best type of mortgage for you and your situation.