Mortgage Types
There are many different types of mortgages available, so many in fact that you may find it confusing deciding exactly which sort is the best one for you.
There are only really two main types of mortgage- the repayment only and the interest only mortgage.
The other thing which distinguishes one mortgage from another is the way in which the interest is charged. In this section we have covered all the other variations of mortgage available that are not covered by these two basic fields of interest and repayment.
100% Mortgages UK
This type of mortgage, as the name suggests, will offer the borrower the full amount of capital that is required to purchase the property in which they are interested. The 100% mortgage UK is a popular option with those who have very little capital behind them, or with young people looking to purchase their first home. This might sound like a tempting solution to those with no or little savings, but it should be taken into consideration that 100% mortgages often carry with them higher interest rates than their counterparts. Also, if house prices fall then there is the chance that you could find yourself in negative equity; in other words, owing your mortgage lender more than your property is actually worth.
Another factor worth considering with the 100% mortgage is that you will usually be required to take out an MIG, or mortgage indemnity guarantee, with it, which will mean further charges and fees. The MIG is a type of insurance policy that protects the mortgage lender should the borrower default or have their home repossessed, and the property sale price does not meet the sum owed. The MIG does not offer the borrower any real protection from debt, and for this reason has become increasingly unpopular.
Bad Credit Mortgage UK
If you have a bad credit history or may have had trouble in the past with things such as mortgage arrears or county court judgement then it need not mean that you should be prevented from buying your own home. Today there are many so-called ‘bad credit mortgages’ available to people who may have had credit problems in the past. With this sort of mortgage the lender is far more likely to judge each application on an individual basis, rather than simply submitting applicants to the usual credit scoring process.
These mortgages will come in all the usual variations of repayment and interest type that you would expect. However, there is one difference that separates the bad credit mortgage from others, and that is that the interest rates charged upon them are usually higher than those that come with other types of mortgage. Basically, bad credit mortgages UK are easier to obtain than regular mortgages, but as a result they are often also more expensive.
Buy To Let Mortgage
The UK buy to let mortgage is one designed for people planning to purchase a property with the specific intent of letting it out to tenants. This type of mortgage was originally set up to cater for the sector of the public that wished to buy a property to let without opting for a traditional commercial mortgage. An increasingly popular way of climbing the property ladder, this type of mortgage will enable the borrower to make their mortgage repayments using the revenue earned from the property rental.
The main difference with this type of UK mortgage is that usually the borrower will be expected to put down a larger deposit. You will not usually be able to procure a buy to let mortgage for an amount higher than 85% of the total property value. Also, buy to let mortgages UK are considered to be a higher risk venture form the point of view of the lender. This is because the mortgage repayments in reality lie with the tenants that will occupy the property, rather than the borrower of the mortgage. For this reason, the rates applied to buy to let mortgages are usually slightly higher than those of regular mortgages.
Buy to let mortgages UK are available in all the same varieties as regular mortgages with regard to interest-type and repayment, so all these options should be available to you as a prospective landlord.
Cash Back Mortgage
Cash back mortgages offer the borrower, in addition to the capital that they wish to borrow, an additional sum of cash back to do with as they please. This is essentially a marketing tool, but it does offer the consumer some benefits. Moving house can be an expensive business and first time buyers especially might appreciate the extra cash in order to fund things like furnishing and redecorating.
With cash back mortgages UK , borrowers should look out for extra fees that they might not have hitherto anticipated such as cancellation penalties (should you decide to leave the mortgage provider within a specified amount of time) and administration costs. Also, sometimes it can be that the larger sum of cash back you are offered, the more expensive the mortgage itself is, and also the more restrictive terms that are imposed upon it.
Flexible Mortgage
Flexible mortgages UK are more adaptable to suit your lifestyle. With a flexible mortgage it is possible to make underpayments and overpayments according to your financial situation, and also do things like take a complete break from repayments with a payment holiday. You can also borrow back the cash that you have repaid should you need to. Some flexible mortgages are administered as part of one huge current and savings account, lumping all your finances together so that they work together and minimise your interest costs. Another advantage offered by most flexible mortgages UK is that your interest is calculated daily, ensuring that you never pay a penny more than you need to.
Perhaps due to the range of advantages that they offer, flexible mortgages are less readily available than other types of mortgages, and may be unavailable to consumers with a poor credit history or to those who are seeking to buy a property that will not act as their main residency.
When looking at a flexible mortgage UK it is important to assess exactly how flexible it really is. For instance, is there a minimum number of flexible payments that you can make? Is there a minimum amount that must be paid back each month? Make sure that the mortgage you choose is going to be flexible enough to fit in with your life the way you want it to.
Remortgage
A remortgage is basically when you change your mortgage provider before the term of your mortgage is up. This is done for a number of reasons, but usually because borrowers either wish to borrow more in order to pay off other debts or because they wish to swap to a provider who offers a better service or a better interest rate.
Remortgages UK can offer advantages, but there are a number of things that you should check before you go ahead and do it. If your present mortgage carries with it a redemption penalty then you could find yourself with a hefty bill for cancellation within a certain period. If you are applying for a remortgage in order to save money then remember to make your calculations including any fees and charges that might be imposed by either the mortgage lender you are leaving or the one you propose to go to.
It is also worth bearing in mind that if you have reached the end of a fixed or discounted mortgage period and are unhappy with the standard variable rate that usually replaces it, then it is worth speaking to your mortgage provider. They may be able to transfer you to another scheme that is more to your liking, and hence solve the problem without incurring you the hassle and extra charges involved in remortgaging your home.
