Mortgages

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A mortgage is a loan which is secured against your home.  When you take out a mortgage you agree to pay the loan back with interest over a period of time agreed with your lender. If for any reason you cannot repay the loan, the mortgage lender can sell the house to recover the debt.

There are many different types of mortgages available and no one type of mortgage is the best, this is because each client scenario differs from that of the last.

Mortgages come in two forms; fixed rates and varaible rates

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Fixed Rates

With a Fixed Rate mortgage the interest is set for an agreed period. This is generally for periods of between 2 and 7 years (although this can be shorter or longer) and offers peace of mind as you are protected against the possibility of interest rate rises. You also have the comfort of knowing exactly what your repayments will be during the initial fixed rate period. However if interest rates fall you will continue to pay interest at the fixed rate which could result in your payments being higher than the lenders Standard Variable Rate (SVR). At the end of the agreed period, the mortgage generally reverts to the lenders SVR applicable at that time; which could result in an increase or decrease in your monthly payments

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Variable Rates

With a variable rate mortgage, the interest you pay and your monthly payment can fluctuate from time to time. Variable rate mortgages come in many different guises, these could be standard variable rates (SVR’s), discounted rates, tracker rates, capped rates or LIBOR linked rates.

Each type works slightly differently and a further explanation of these can be found within our Mortgage Glossary.

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