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Types of Mortgages

The types of mortgages on the market today are more varied and versatile than ever before. Whether you're searching for a new residence, an investment property or a commercial building, lenders are keen to offer deals in this competitive economic climate. Comparison shopping remains one of the most effective ways to avail the best mortgage rates on the market. Compare quotes from a number of FSA regulated brokers and lenders before you settle for second best terms.

The key to finding affordable mortgage advice is to find an affordable interest rate on a home loan. Rates vary depending upon the lenders, the types of mortgages and the types of repayment schedules. With the proper rate and repayment method, you can avail a loan with affordable repayments that will help you achieve your dream of home ownership. Throughout your search, use a mortgage repayment calculator to estimate your monthly repayments so that you're aware of your potential obligations.

Traditional Residential Loans

The majority of borrowers who seek financing for residential properties obtain loans with variable rates. Variable mortgage loans are based on the Standard Variable Rate, or SVR, which is determined by the Bank of England's base rate for monetary policy. Bankers, building societies and other lenders may adjust their rates within certain limits, using the SVR as their guide. Tracker mortgages are similar in that their rates "track" certain guidelines; however, margins are clearly set with tracker mortgages.

If you're shopping for variable mortgages, look for banks that keep their rates within a narrow percentage of the SVR. The closer the margins, the less dramatic the fluctuations in your repayments will be. The term of a mortgage loan may last 25 years or more, and over time, even a small increase in your rates may result in noticeably larger repayments.

Many banks and building societies offer promotional types of mortgages in order to attract business. Fixed rate mortgages feature set rates that do not rise or fall for the first few years of the mortgage loan. With these mortgages, home owners can easily work their payments into their monthly budget. A discount mortgage and a capped mortgage are types of mortgages that offer reduced or limited introductory rates. In general, all of these types of mortgages revert to the SVR or a similar standard after the first 1 to 5 years.

The most common method of paying off house loans is the traditional repayment mortgage. With a repayment mortgage, the borrower pays off a percentage of the capital and interest each month until the end of the contract. With interest only loans, interest is paid throughout the course of the mortgage. The capital is repaid at the end of the contract through an endowment policy, personal equity plan or a lump sum from a personal pension scheme.

Buy to Let Properties

Borrowers who are keen to use their property as a source of income can investigate types of loans that allow them to let a house to tenants. These specialist types of mortgages, called buy to let or investment loans, are not as competitively priced as traditional residential types. However, buy to let schemes allow investors at all levels of experience to expand their financial portfolios and pave the way to a more financially secure retirement.

When you apply for investment types of mortgages, a lender will evaluate the property as a suitable rental home. The lender will assess the rental market in the area and determine whether the types of tenants you might attract would be stable residents. Once you've purchased a buy to let home, you can anticipate collecting around 125 percent of the monthly mortgage repayment in rent from your tenants.

The income you earn from these types of properties may be taxed fairly heavily. However, landlords may deduct a percentage of their maintenance expenses for the property and the interest they've paid on these types of loans when they submit their taxes. After you've paid off these types of mortgages, the house may become a steady source of income to supplement your pension.

Right to Buy Mortgages

Right to buy schemes have become increasingly popular as council tenants and public sector residents avail the opportunity to own rather than rent their homes. A council tenant who has occupied a property for the required period of time -- generally 2 years -- may apply to purchase the house at a discounted price. The extent of the discount will depend on how long you've been renting the property.

With so many types of mortgages on the market, there's no need to spend money for rent if you dream of owning a home. Using the free resources on our site, you can explore your options and request quotes from trusted lenders in our network. Take advantage of competitive rates to secure financing for the house you truly want.

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