There are many different kinds of mortgages available offered due to banks increasing the range of their products on offer.
I will try to explain the basic issues regarding the most popular mortgages available.
Repayment Mortgage require payments to the lender which consist of a combination of interest and capital. The final payments at the end of the Mortgage term will pay the final amount of capital owed.
Interest only mortgage require payments which cover the interest ONLY but make no reduction to the amount borrowed. The lender will require the borrowing to be repaid in a lump sum at the expiry date of the loan. It is usual for an investment or saving plan to be put in place to provide for the repayment of the loan on the due date.
Fixed Term Mortgage – this scheme gives a borrower a guarantee that for a given period of time the applied mortgage interest rate will be fixed and unaffected by either rises or falls in underlying interest rates.
Variable interest Mortgage – this is the normal method of charging for the money borrowed from a mortgage lender. As (national) interest rates change, a lender will announce its rates will vary – up or down – and the rate will change after a notice period.
– Lenders do not normally charge arrangement fees for variable rate loans.
– Early redemption charges (for early settlement) are not normally applied.
Tracker Mortgages – a tracker mortgage is a variable rate mortgage where the interest ‘tracks’ another rate or index, i.e. the Bank of England base rate, at an agreed rate, or the lenders Standard Variable Rate.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. You should think carefully before securing other debts against your home.