In the beginning of the mortgage process, first time buyers in Middlesbrough will very quickly realise that there are lots of different options available to you as a customer. Below we have put together a list of the most popular types of mortgages available on the market, hopefully answering any questions that you may have. If you would like to speak further with a mortgage advisor in Middlesbrough regarding any of these, please do not hesitate to get in touch.
A fixed-rate mortgage is a simple form of mortgage wherein your monthly payments are going to stay the same for a set period of time. You are able to set the length of which you want to fix your payments for yourself, with standard choices being 2, 3 or 5 years or sometimes longer. Even if there happen to be any major changes to inflation, interest rates or the economy, you know that your mortgage payment, usually your biggest outgoing, will stay consistent.
A tracker mortgage will follow the Bank of England’s base rate. What this means is that the lender that you are with does not actually set the interest rate themselves, thus making it potentially unpredictable due to the potential for it to change. You will likely be paying a percentage above the Bank of England base rate. An example of this would be if the base rate is 1% and you are tracking at 1% above base rate, that means that you will be paying a rate of 2%.
By taking out a repayment mortgage, this means that each month you will be paying back a total combination of capital and interest. Providing that you keep your payments going for the full length of the mortgage term, the mortgage balance is almost certainly going to be paid off at the end and the property will become yours.
This is widely considered to be the most risk-free way to pay your capital back to the lender, especially as in the early years it is mainly the interest that you are paying and your balance will reduce at a slightly slower pace, especially if you have taken out a term over 25, 30 or 35 years. Your circumstances will change within the last ten years or so of your mortgage, as your payments will be paying off more capital than interest and the balance will come down at a quicker pace.
Whilst many look into buy to let mortgage advice in Middlesbrough are set up on an interest-only basis, taking out a regular residential mortgage in the form of interest-only is a lot more difficult and not seen as often.
It is a lot less likely for lenders to offer an interest-only product to applicants these days. That being said, there are very particular circumstances where this can be an option. These options can include downsizing later in life or to use the capital to pay off other investments. Lenders are very strict when it comes to offering these products now and the loan to values are a lot lower than they used to be.
With an offset mortgage, the lender will set you up a savings account to run in tandem with your mortgage account. This is quite in an interesting one in how it works. Let’s say you have a mortgage balance of £100,000 and £20,000 is transfered into your savings account; you would only be paying interest on the difference between the two amounts, so in this case it would be £80,000. This can be a very efficient and financially savvy way of managing your money, especially if you are a taxpayer with higher rates.