Skip to content

Mortgages

One of the biggest decisions we have to make in life is often buying a property. In order to do this a mortgage is needed.

A mortgage is a large loan provided by a bank or building society that has usually has to be paid off within 25 years. To take out a mortgage you will need a cash deposit.

Mortgages can be complicated so most people will choose to use a qualified mortgage company. Top House takes the stress away by finding you the best mortgage deal and advising you through the steps of buying a property from start to finish.

Different Types of Mortgage

There are many types of mortgage available so you will need to first decide between an interest only or repayment mortgage.

Interest only is where you will only repay the interest each month and not the money that you have borrowed. At the end of the mortgage term you will need to pay the entire amount back that was originally borrowed. These are harder to take out as many lenders no longer offer them so the range of interest only mortgages will be more limited and only available to certain customers.

With a Repayment mortgage, you pay the interest each month plus a repayment of the original amount. At the end of the term you will have no more to pay – as long as you have kept up monthly repayments throughout the term. These are the most popular type of mortgage.

The loan is paid back to the lender with interest and the property itself used as security for the lender. If payments cannot be made or the mortgage paid off then the lender has the right to repossess the property and sell it to get their money back.

Most lenders will not give out a loan for the full amount of the property value so you will need to put down a cash deposit to make up the percentage to 100% of the property value.

Example: Property Value £ 100,000

Mortgage amount £ 90,000

Cash Deposit £ 10,000

Mortgage + Cash deposit = 100% property value

Most lenders will not give out a loan for the full amount of the property value so you will need to put down a cash deposit to make up the percentage to 100% of the property value.

Below are some terms used to explain the interest rates that you pay on a mortgage

Standard Variable Rate Mortgage (SVR)

These have an interest rate that can change from one month to the next. This rate is paid each month with the interest rate being based on the Bank of England’s base rate and the base rate of each Lender. With variable rate, there is the chance that repayments could ride or fall depending on interest rates so monthly payments will be vary.

Fixed Rate Mortgage

With a fixed rate mortgage the interest rate payable stays the same for an agreed period of time, even if the Bank of England base rates change. You will have the certainty that the monthly cost of your mortgage will not change during the fixed rate term. The fixed rate products are usually between a 2 – 5 year period.

Discount Mortgage

For new customers and first time buyers, these are similar to a standard variable rate mortgage but have a discount on the rate that has to be paid back. These normally last from 2 – 5 years and will transfer automatically to a Standard Variable Rate Mortgage after the term has ended.

Tracker Mortgage

The interest on this type of mortgage will stay directly proportional to in the Bank of England Base rate. These typically have a higher rate of interest and can last from 1 year through to the lifetime of the loan. You would pay more each month should the rate increase, but likewise, benefit if the interest rate were to fall.

Capped Rate Mortgage

This is similar to a Standard Variable Rate but comes with an interest rate cap so you know the maximum that you would have to pay.

Offset Mortgage

For those with large amounts of savings, an offset mortgage saves on the amount of interest you pay over the term of the mortgage.

Fixed, Tracker and Discount rate mortgages can come with early repayment charges so always check the small print. The lender may also charge a ‘booking/arrangement fee’ to apply for this type of mortgage. After the fixed, tracker or discount rate ends the mortgage will revert on to the lenders' standard variable rate.

Specialist Mortgages

Getting a mortgage offer isn’t always easy, especially if you’re looking for something a little more unconventional like a self-employed mortgage, new build mortgage or a bridging loan to cover the gap between two mortgages.

Self Build Mortgages

If you plan to build your own home then you will need to take out a specialist self-build mortgage to finance it. These mortgages work differently to standard mortgages, with the lender releasing cash in stages during the build. Some lenders will only pay after stages are successfully completed while others will make an advance payment so you can pay for the work as you go.

You should also note that planning permission and detailed plans need to be in place and you will need to show that you are employing professionals rather than doing the work yourself.

Self-employed Mortgages

Getting a mortgage can feel like a hassle for the self employed. We can advise you on the proof of income you will need and which lenders would be available to you.

Bridging Loan

If you are purchasing a new home before you’ve sold your current property then you may need a bridging loan to cover the period in between.

Remortgaging

Remortgaging is when you take out an additional or different mortgage on a property you already own. For example, you may remortgage when your current mortgage deal is about to come to an end to see if you can find a better rate or more suitable product, or you may remortgage to fund some improvements to your home.

Remortgaging is something we should all think of regularly to make sure we are still on the best mortgage deal.

To find out more about the types of Mortgage available please contact Top House, where we will be happy to advise further.

Contact Us

  • This field is for validation purposes and should be left unchanged.
Scroll To Top