As more and more financial products begin to crowd the UK property market it has never been more difficult to understand the various mortgage types… there are simply so many these days. So how, you may well ask, do you know which mortgage package is right for you?
When it comes to property finance, mortgages and selecting the best financial products, it is all about research.
It can also be very helpful to seek professional financial advice, as an experienced independent financial expert can guide you through the plethora of mortgage products on the market and help you to select the mortgage product that is best suited to your circumstances and more importantly, is affordable for your current situation.
Popular Types of Mortgage
Two of the most recognisable mortgage products on the market still prove to be repayment and interest only mortgages… so, what’s the difference?
Interest Only Mortgages
Interest only mortgages work exactly how their name suggests… you pay the mortgage lender only the interest on the amount you borrow.
This means that should you borrow £250,000 from a mortgage lender over a 25 year period, you would make regular, usually monthly payments, but at the end of the term you would still owe the lender £250,000 because you have been only been paying the interest on the money you originally borrowed.
This form of repayment is not an ideal scenario, but it can help many people to at least get, or keep their home.
A repayment mortgage is the type of mortgage that many people in the UK will opt for and it is classed by many as a “traditional” mortgage.
A repayment mortgage is where you make monthly repayments to the mortgage lender (normally over a period of 25 years although it can be more, or less) and after this time has run its course, the property would be yours outright… it’s pretty simple.
Mortgage Interest Rates
It isn’t just the type of mortgage that you are taking out that you need to be aware of, you also need to be clued up when it comes to the different ways that lenders can charge you for the privilege of borrowing their money.
It is important that you get this right from the outset as even the slightest interest rate increase on the wrong rate could mean that you repay thousands more over the term of your mortgage.
Different interest rates that may be offered to you include:
In order to fully understand what these alternative interest rate mechanisms mean for you, you should thoroughly research the mortgage markets and also seek the advice of an independent financial professional, preferably a specialist in mortgage products.
To give you a rough idea, however, we’ll provide you with a quick breakdown of what each rate mechanism involves.
Minimising your Monthly Re-Payments
Always bear in mind when analysing different mortgage types that a big portion of what you can expect to pay each month is still under your direct control.
This is because, if you save up long enough to build a bigger deposit, it will mean that your mortgage repayments will generally be lower as you have to borrow less.
Finally, a few things that you should bear in mind that will stand you in good stead when it comes to choosing a mortgage:
Specialist Self Build Mortgages & Property Finance Solutions
As a leading independent property investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.
If you are searching for specialist self build mortgages or other property finance solutions please contact us today to discuss how Investment Property Partners can help you.
More information about self-build homes… here →
More information from the UK’s Council of Mortgage Lenders (CML)… here →