If you are looking to buy your first property, it's important that you get clued up on what type of mortgages there are available to you and how they work.
There are so many mortgages out there for you to choose from and it's a good idea to shop around in order to get the best deal you can.
One other thing that you should look out for when contemplating getting a mortgage is the fees that you will be charged when setting up your mortgage.
Also bear in mind if there are any redemption fees should you want to pay back to mortgage before the end of the agreed term.
Finding the Right Mortgage
Here are some of the types of mortgages available to you on the market today.
- Fixed Rate Mortgages - Fixed Rate Mortgages are a mortgage where the interest rate is fixed for the first 2-5 years, once this period is over you will then however be subject to the standard variable rate (SVR) which is set by your lenders. Fixed Rate Mortgages will allow you the peace of mind in knowing that your interest rates will not shoot up dramatically and result in your monthly mortgage payments rising too.
- Variable Rate Mortgages - Variable Rate Mortgages often leads to you paying more money than you would normally if you had chosen to use any of the other mortgage types. With Variable Rate Mortgages you are subject to the lenders SVR which will fluctuate constantly depending on the interest rates set by the Bank of England.
- Capped Rate Mortgages - A Capped Rate Mortgages allows you to know what will be the maximum mortgage repayments you will have to pay. If the rates should drop however, this Capped Rate Mortgages will also allow your mortgage repayments to drop accordingly.
Discounted Rate Mortgages - Discounted Rate Mortgages will keep your interest rate fixed and will not alter, no matter what the interest rate is at the time. This will help to keep your repayments low during the early years of your Discounted Rate Mortgages repayments.
Checking Mortgage Redemption Penalties
No matter what mortgage type you choose there will most certainly be a clause in your agreement that will state that if you should wish to pay back the mortgage before the agreed term is over there shall be a charge which you will be obliged to pay as a penalty.
These penalties could be as much as six months of interest payments. Always make sure that when you take out a mortgage you check for penalties such as these before you agree to take out the mortgage.