If you are coming to the end of a fixed term mortgage, are a first-time buyer looking to get onto the property ladder, or you’re approaching retirement and looking to reduce the amount you pay per month, you’re probably wondering what kind of mortgage to opt for and how you can get the best deal. With interest rates increasing, it is important you do your research so you can be sure you’re getting the right bang for your buck. In this piece, we’ll look at some of the most common mortgage types, and whether there are alternatives available for those who want to get rid of monthly payments altogether.
The most common type of mortgage in the UK is a repayment mortgage. This is the standard mortgage most homeowners opt for whereby you get a loan from a provider to purchase a property with a contract that stipulates a monthly repayment plan that covers both the capital borrowed and the interest associated with the loan amount.
This will depend on your circumstances, and in the current climate, the best type of mortgage may be a fixed-rate mortgage if you think rates may go up or you do not want to be exposed to increasing rates. Those who secured such a mortgage in recent years will have been able to avoid the substantial interest rate increases that have left many homeowners worse off each month. If you are coming to the end of an existing fixed-term, you are likely to find current deals aren’t as attractive, but it is still worth looking into signing up for a fixed-term again in order to avoid any potential increases that may come in the near future.
The other side of this, of course, is that if rates end up falling again, you will not be able to take advantage of those savings. However you take out a tracker mortgage, you will be exposed to rates going up, but equally you will benefit from rates going down as your mortgage will be linked to the bank rate of England and follow any decrease in interest rates.
This depends entirely on both the provider and the length of the term. Some of the best rates are available for those looking to borrow at 60% loan-to-value, with Barclays offering around 6.07% at time of writing. If you are able to get together a deposit of 25% or you wish to remortgage at a lower LTV, you could find some good deals. First-time buyers with lower deposits, e.g. 5%, will likely pay the highest rates but you could still get a two-year fixed deal at around 6.62% at time of writing (Lloyds Bank).
With mortgages and interest rates being at an all-time high, finding a way to take the first step on the property ladder can be tough. First-time buyers may want to consider spreading the cost of their mortgage by taking out a 30 or 40 year term. The longer the term, the less the monthly repayments; although you must also be aware that the longer the term, the more you will pay in interest and therefore the total loan amount.
Again, this depends on the provider, the term, and the individual circumstances of the person applying, but there are many banks and building societies out there doing their best to offer deals to those looking to secure a new deal. Speak to an independent adviser today such as Bower to weigh up your options and find the right deal for your lifestyle.
