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by Seek UK
If you are a mortgage aspirant, then you need to do a bit of information digging so as to help you decide which mortgage deal is going to suit you.
Types of Mortgages
If you are a mortgage aspirant, then you need to do a bit of information digging so as to help you decide which mortgage deal is going to suit you.
With the competition between mortgage lenders really heating up, there are a myriad of mortgage options available that you can choose from. This makes it even more important for you to be in the know of the kind of mortgages available in the market.
Mortgages are essentially loans drawn against some collateral. In other words you can use the money from a mortgage to buy a property and the lender can stake legal claim on that property until you pay back the loan. Also, if you fail to pay back your mortgage, the lender can repossess your property.
Mortgages usually differ on two points namely pay back capital and the interest you pay. On the basis of the way you pay back your loan, mortgages can be of three types:
Repayment Mortgage: In a repayment mortgage you pay off some amount each month, which goes towards the payment of interest and the principal amount. At the end of the term the mortgage is cleared.
Individual Saving Account: This mode uses an ISA to pay back the loan; but if your investment performs badly, you may find it difficult to pay back the loan.
Pension Mortgages: At the end of the mortgage term, you can use the tax-free cash from your pension to pay off the loan. On the basis of interest rates, mortgages may be any of the following:
Variable rate mortgages: In case of a variable rate mortgage, the interest rate on your mortgage varies in accordance to the varying base rate of the bank of England.
Fixed rate mortgages: The interest rate on a mortgage remains fixed throughout the term of the mortgage.
Capped rate mortgages: The interest rate on such a mortgage is fixed but lowers if the base rate falls.
Discounted rate mortgages: In case of a discount rate mortgage, the lender offers the borrower some discount off the variable rate. Now that you are aware of the different options available in the market with regards to mortgages, you can easily select the mortgage type that befits your situation.
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