Types of Mortgages

Mortgage Advice - Types of Mortgages

 PROPERTY ADVICE BLOG - Mortgages Explained

•    Capital Repayment Mortgage  – this method involves repaying the interest and capital on your mortgage at the same time over a set period.

•    Interest-only Mortgage – the capital is not repaid until the very end of the mortgage period. Unlike a capital repayment mortgage where you pay back both the capital and interest in regular monthly payments, the interest only mortgage means you may pay a lot less for a set period of time. However at the end of your mortgage term you still have to pay back the sum initially borrowed.

•    Endowment Mortgage – this is an interest only mortgage where the capital is paid at the end of the mortgage period by the endowment policy or policies.

•    Pension Mortgage – an interest-only mortgage which is funded by a personal pension scheme. As a tax-free lump sum of cash, a personal pension can be used for the pension mortgage at the time of retirement.

•    An Investment Backed Mortgage – this method of repayment is funded by an investment plan such as an ISA or PEP. This is another interest-only mortgage where the capital is repaid at the end of the mortgage period. PROPERTY ADVICE BLOG would advise that PEP investment plans are not currently available to new investors.

•    Buy to let mortgage – this is a semi-commercial mortgage for those who let residential property to tenants.

•    Right to buy mortgage – this mortgage can be arranged for council or housing association tenants under the ‘right to buy’ home legislation.

•    Let and buy mortgage – buyers can get a mortgage on a new property whilst letting an existing owned property.

•    Flexible mortgage – this method gives home owners the chance to take payment holidays, allows for underpayment and also for additional capital payments without owners being penalised.

•    Deferred interest mortgage – in the first years of the mortgage this system is attractive to those who want to maximise the loan and minimise the repayments. However, the interest must be paid at a later date.

•    Adverse credit mortgage – this is suitable for borrowers with a bad credit history or related credit problems.

•    Self-cert mortgage – borrowers are eligible for this mortgage by producing a certified statement of earnings to prove they can afford the property.

•    Non-status mortgage – the applicant’s income is not taken into account for this method, although the borrower must state that they are financially able to make the repayments.

•    Offset mortgage – borrowers can offset a credit balance against the debt pertaining to the mortgage. By doing this the interest can be reduced.

•    Foreign currency mortgage – capital and interest are reduced by transferring debt to a foreign currency or currencies. This is possible through the difference in exchange rates.

Before you sign on the dotted line, be aware of all the hidden charges and fees. Property Advice Blog highlights some of the key phrases associated with mortgage repayments so that you know exactly what you’re agreeing to.
For a sound investment which won’t compromise your future, get clued up on all the different interest rates and mortgage types. The comprehensive mortgage advice guide below differentiates a variety of interest rates on offer.