There are various types of mortgages available to accommodate individuals from diverse financial backgrounds: Tracker Mortgages, Buy To Let Mortgages, CCJ Mortgages, Current Account Mortgages, and many more. The key to finding the right mortgage for YOU is to thoroughly understand your financial situation and be truthful about what type of property you can and cannot afford. Once you’ve determined the loan amount, seek out a mortgage product that best suits your needs. Your mortgage rate could fluctuate depending on the mortgage you select and the state of the financial market, so it’s essential to ensure that you are financially prepared to weather any changes.

In general, most mortgages are long-term loans that can be repaid over a fixed period of time. However, not all mortgages are fixed, giving borrowers the opportunity to repay the loan earlier if desired. This is the case with flexible mortgages, where borrowers may have the option to take payment holidays and repay the loan earlier or later than planned.

We will delve into each mortgage type in more detail later in this article series. For now, let’s begin with a brief overview of the most popular mortgage products you may be offered by your Bank or Independent Financial Advisor:

Mortgages Explained (Quick Guide)

Capital Repayment – this method involves repaying the interest and capital on your mortgage simultaneously over a set period

Interest-Only – the capital is not repaid until the end of the mortgage period. Unlike a capital repayment mortgage where you pay back both the capital and interest in regular monthly payments, an Interest-Only mortgage means you may pay less for a set period of time. However, at the end of your mortgage term, you still have to repay the sum initially borrowed

Endowment – this is an Interest-Only mortgage where the capital is paid at the end of the mortgage period by an endowment policy or policies

Pension mortgage – an Interest-Only mortgage funded by a personal pension scheme, which can be used for the mortgage at the time of retirement

Investment Backed – repayment is funded by an investment plan such as an ISA or PEP. This is another Interest-Only mortgage where the capital is repaid at the end of the mortgage period. [It’s advisable that PEP investment plans are not currently available to new investors]

Buy-to-Let – a Semi-Commercial mortgage for those who let residential property to tenants

Right-to-Buy – this mortgage can be arranged for council or housing association tenants under the ‘Right-to-Buy’ home legislation

Let and Buy – buyers can get a mortgage on a new property while letting an existing owned property

Flexible mortgage – gives homeowners the chance to take payment holidays, allows for underpayment and also for additional capital payments without being penalized

Deferred Interest – in the first years of the mortgage, this system is attractive to those who want to maximize the loan and minimize the repayments. However, the interest must be paid at a later date

Adverse Credit – suitable for borrowers with a bad credit history or related credit problems

Self-Cert – borrowers are eligible for this mortgage by producing a certified statement of earnings to prove they can afford the property

Non-Status – the applicant’s income is not taken into account for this method, although the borrower must state that they are financially able to make the repayments

Offset – borrowers can offset a credit balance against the debt pertaining to the mortgage, reducing the interest

Foreign Currency – capital and interest are reduced by transferring debt to a foreign currency or currencies, possible through the difference in exchange rates

Mortgage fees

Valuation fee – paid to a chartered surveyor when the property has been evaluated and shown to meet the mortgage rate

Product fee – the asking price attached to a particular mortgage deal required from the borrower

Early repayment charge – a penalty if the loan is repaid within the incentive period, which is typically less than the typical market borrowing price

Mortgage Brokers – What does a Mortgage Broker do?

Mortgage Brokers work on behalf of clients by sourcing relevant mortgage loans. The type of service a Mortgage Broker may offer depends on their jurisdiction. UK Mortgage Brokers are regulated by a governing body and can be held responsible for their recommendations on property finance and related advice. However, some brokers may limit their service to recommending appropriate lenders without giving any guidance at all.

Typical Tasks

Mortgage Brokers generally assess the borrower’s credit history and ability to afford mortgage payments based on a credit report and evidence of income

They assess the market to choose the most suitable mortgage for their client and make recommendations

Many mortgage brokers explain the legal paperwork and related property finance

They apply for a lender’s agreement and request clients to provide all necessary documentation such as payslips and bank statements

Mortgage Brokers complete a lender’s application form and submit all paperwork and evidence to the lender

Additionally, there are three important questions to ask.