One constant thing to remember is that all mortgages have the same basic concept. You borrow money to help finance a property, you pay interested on what you have borrowed and eventually over time you pay off what you have borrowed.
The complications come when you weigh up the different types of mortgages. With different types of mortgages comes different advantages when it comes to purchasing a property. We at Mis-Sold Mortgage Experts believe that it is always best to understand the mortgage you want to take out before approaching your bank about it, to prepare for mis-selling if it occurs.
Probably one of the most basic mortgages to go for, a repayment mortgage is what is says on the tin. Each month you pay back a portion of the money you have borrowed, including interest. This process for a repayment mortgage usually goes on for around 25 years until you have paid back everything you borrowed, and the property is then completely owned by you.
Interest Only Mortgage
With an interest only mortgage, the idea is that you merely pay back portions of the interest month by month. Though an interest only mortgage sounds quite appealing, you must be quite careful. Although your monthly outgoings will be lower than expected, you will still have to pay the full entirety of your mortgage at the eventual end of the mortgages term.
You must ensure that you have the money to pay back when your interest only mortgage ends, whether it comes from inheritance, your own savings or any means of having the money prepared. So, in short, if you feel you’d rather pay a lower monthly repayment and save up money for the entire mortgage for its future payment, then an interest only mortgage may be best for you.
Variable Rate Mortgage
A variable rate mortgage can come off as a bit of gamble for some people. For everyone wanting to borrow money from their bank, they have an SVR mortgage. This is named as their basic mortgage, whereas the interest rate can fluctuate. This is down to the fact that mortgage rates do tend to go up and down constantly.
In the long run, it is possible that your variable rate mortgage can change whilst your interest rate changes the same, and vice versa. This type of mortgage is best for people who believe mortgage rates are going down but other than that, a variable rate mortgage may not be best for you.
Tracker mortgages basically track. This type of mortgage moves linearly with an appointed source of interest rates, usually the Bank of England. Ultimately, the mortgage that you pay will have a set interest rate, either above or below your base rate. When your base rate goes up, your mortgage rate goes up. When one goes down, the other goes down.
Although you can set a minimum rate for your interest rate to never go below, there is no maximum limit for how high it can go. So, if you can afford to pay for this mortgage if the rates go up then tracker mortgages might be best for you.
Capped Rate Mortgage
A capped rate mortgage is basically a variable rate mortgage with a cap that limits how high your interest can increase to. This is of course a very appealing mortgage scheme in that you will never have to exceed a certain amount in terms of your repayments.
So, if you feel the mortgage rates are going to boost, a capped rate mortgage may be best for you. However, it is worth mentioning that a capped rate mortgage isn’t offered very much anymore due to mortgage rates being quite low in these recent years.
Cash Back Mortgage
Acting sometimes as something to sweeten the deal, cash back mortgages are offered by banks when you take out a mortgage with them. They will usually offer you money back, some form of chunk of money that should be in your mortgage scheme but is instead given back for you to not worry about and spend how you see fit, however some people will usually invest it back into their house payments or decorating their new property. So, if you feel you would benefit from a lump sum to put back into something to do with your new home, then cash back mortgages may be the best choice for you.
Buy to Let Mortgage
A buy to let mortgage consists of buying a property only to then rent it out for others to live in. The amount of money you would wish to borrow from your bank can be based on how much you are expecting to rent out your property for. It is worth noting that a first time buyer would most probably not be accepted for this type of mortgage.
A flexible mortgage is one of the most appealing mortgages available. The idea of a flexible mortgage is that you have a lot of freedom in how you pay your mortgage; you can pay more off than usual if you come into an extra bit of money during a month, or you can take a payment holiday if you find yourself unable to pay your mortgage for a certain amount of time. Although, if you choose a flexible mortgage, the mortgage rate will tend to be higher than on other schemes.
Before considering these different types of mortgages, you must ensure that you know exactly what you are looking for. You need to think about the length of your mortgage, your uses of it and whether or not you will need to be fixed or changeable in how you pay it. At Mis-Sold Mortgage Experts, we promise that any scrutiny that seems to surround the mortgage you eventually choose can be handled by ourselves.
If you have any of these or other kinds or mortgages and feel you have been mis-sold based on what they told you during the initial sale, contact one of our experts by either calling 0800 756 3986 or e-mailing firstname.lastname@example.org.