What types of Mortgages are there?
Share this article...
There are various types of mortgage ‘products’ to suit your needs.
A mortgage is perhaps THE singularly most influential aspect of how, when, and to what we move to! Our eligibility for mortgage funds dictates what we can afford. So, what types of mortgages are there, how do they differ, and what related information might be useful for you when considering your conveyancing? Here we take a look at mortgages as a broad subject matter.
What is a Mortgage?
Let’s start at the beginning! A mortgage is simply a loan, which is ‘secured’ against your home.
Mortgage – what does ‘Secured’ mean?
Secured means that the loan is legally ‘attached’ to your property (rather like higher purchase agreements say on a car). Although you are the legal owner of a house that is mortgaged, you nonetheless are at risk of losing your home if you do not keep up the repayments on any loans secured against it.
What Types of Mortgages are there?
Mortgages come in all shapes and sizes. And, they are used to buy properties, but a common point at which a new mortgage might be taken is also when we ‘remortgage’. Broadly, some of the more common types of mortgages include:-
- Fixed Rate Mortgage
- Tracker Mortgage
- Discount Mortgage
- Standard Variable Rate Mortgage (SVR)
- Interest Only Mortgage
Other relevant stuff you might want to think about is whether you are taking the mortgage in your sole name, or jointly (see below). And, are you using the mortgage during a move of home, or simply to switch lender and stay in the home you already own (remortgage)?
What is a Fixed Rate Mortgage?
This is a common form of mortgage used by many home buyers. With this type of mortgage, you will pay a fixed rate of interest for a fixed number of years.
What happens at the end of a Fixed Rate Period?
Generally, you will either move on to a variable rate mortgage with your lender, or you will need to remortgage. This depends on your particular deal.
What is a Tracker Mortgage?
The interest on a tracker mortgage move in line with the Bank of England base rate (plus a certain percentage). So, if the base rate goes up, so do your monthly mortgage repayments!
What is a Discount Mortgage?
These are generally a tracker mortgage with a built in percentage discount for a period. They are often used as an introductory offer to tempt borrowers in.
What is a Standard Variable Rate Mortgage (SVR)?
These are like a tracker, BUT, the rate is NOT fixed against the Bank of England base rate, they are fixed by the lender themselves. The rate for this type of mortgage is usually higher than tracker and fixed rates.
What is an Interest Only Mortgage?
These are relatively unusual these days. It is a mortgage where you only repay interest for the duration of the loan – leaving all capital outstanding. An interest only mortgage requires you to have some means of repaying the capital sum at the end of the mortgage period (else, of course, to sell the property to realise its value and repay the capital sum).
What is Loan to Value (LTV) for my Mortgage?
This is the percentage mortgage you take as against the value of your home. So, if your home is worth £1mil and you take a £500k mortgage your LTV is 50%.
What is a Remortgage?
A remortgage is simply where you move to a lender but stay in the property you already live in – ie it is not part of you moving home.
It’s good to establish how much you can borrow before house hunting!
Do I need a Conveyancing Solicitor to Remortgage?
Yes! Just like when you move and take a new mortgage, you need a conveyancing solicitor to act in the remortgage. That remortgage solicitor will actually be acting for both you and your lender (as they did when you actually moved house).
Solicitor Cost for Remortgage?
Don’t just guess how much a remortgage solicitors costs would be, get an instant online quote now to confirm the exact solicitor cost for a remortgage.
> Get an Online Conveyancing Quote Now!
How long does a Remortgage take?
Barring problems, you would expect your remortgage solicitor to have things completed within around 4-6 weeks. This assumes there are no issues of course!
What is a Mortgage Broker?
Whatever type of mortgage you are intending to take out, you may wish to use a mortgage broker. They are like a financial planner that specialise in mortgages.
What is an Independent Mortgage Broker?
An independent mortgage broker has access to the whole mortgage market, whereas a tied broker will work for just one lender (and therefore only recommend products from that one lender.
Can I apply directly to a Lender?
Yes, you do not have to use a mortgage broker and you can apply directly to your lender of choice.
Got more questions about Mortgages?
We can NOT advise you on the financial suitability of particular types of mortgages for you and your circumstances. But, if you have any questions about the legal side of mortgages, or the different types of mortgages in a generic sense – do reach out! We have lots of content here on the conveyancing section of our website. And, if that doesn’t cover off your questions – our team of expert remortgage solicitors are here to help!
Share this article...