A guide to 15 different types of mortgages on offer in the UK. From Standard Variable Rate mortgages to more unconventional mortgages such as Current account and self certification mortgages
1. Standard Variable Mortgage
The most common type of mortgage. Mortgage payments depend on the lenders SVR. This is usually influenced by the Bank of England Base Rate.
2. Fixed Rate Mortgage
A mortgage with a period of 2-4 years where the interest rate on mortgage payments is fixed. There may be a slight premium for security, but it avoids interest payments becoming un affordable.
3. Capped Mortgage
This is like a fixed rate mortgage. It states a maximum interest rate but it can fall under some circumstances.
4. Self Certification Mortgage
A mortgage where there is not any need to prove your income through published accounts. Often taken by self employed.
5. Repayment Mortgage
A mortgage where you pay both, interest on the loan and capital repayments. Most mortgages are repayment mortgages. It means at the end of your mortgage term you will have paid off your mortgage debt.
6. Interest Only Mortgage
Mortgage where you only pay interest on loan and do not repay any capital. This requires a separate investment plan to be able to pay off the mortgage capital at the end of the mortgage term
7. Investment Mortgage.
A type of interest only mortgage but where taking out a mortgage also involves taking out a complementary investment plan to be able to pay off the mortgage debt.
8. Endowment Mortgages
Similar to an investment mortgage. There were many problems with endowment mortgages in the UK because often the investment failed to be sufficient to pay off debt.
9. Base Rate Tracker Mortgage
Similar to a standard variable rate mortgage. This is a mortgage where the interest rate is fixed to a certain discount compared to the Bank of England Base Rate
10. 100% and 125% mortgages
Usually it is necessary to pay a deposit of upto 10% of the house price. However with rising house prices many lenders are now offering a mortgage for the full amount. In some cases lender offer more than 100% to enable spending on the house itself.
11. Joint Mortgage
A Joint mortgage involves buying a house with others to increase the chance of getting a mortgage. Also known as co buying mortgages.
12. Adverse Credit Mortgages
Help for people looking for mortgages with bad credit ratings
13. The Never Ending Mortgage
A new and quite small type of mortgage where there is no necessity to pay off the mortgage at all. Instead you can pass your mortgage onto your children.
14. Reverse Mortgage
This is where you can receive income from the value of your house in return for the lender receiving an increasing share of the value of your house.
15. Buy to Let Mortgages
This involves getting a mortgage to buy a house with the specific intention of renting it out. These mortgage are more dependent upon the state of the Housing market
16. Offset / Current Account Mortgage
This is when your mortgage is combined with your current account at a bank or building society. If you have savings in your current account these are automatically used to reduce the mortgage capital you owe and therefore lower the level of mortgage interest payments