Mortgage Advice

Mortgages Explained

What is a Mortgage

A mortgage is a 'secured' loan, which means that the loan is secured against the property being purchased until the mortgage is paid off.

What are my options?

Whether you are a first time buyer, or someone who has moved home many times, it is important to understand the different options available to you, so you get the right mortgage.

There are two ways for you to repay your mortgage:

  • Repayment: you pay interest and part of the capital with each payment you make;
  • Interest only: you only pay the interest on the money you have borrowed.

You may also benefit from placing part of your loan as repayment and the other part as interest only.

What are the different mortgage interest options?

There are a wide range of different interest rate options to match your needs and each one has its advantages and disadvantages. Below are some of the most popular types of mortgages available:

Type of mortgage interest optionDescriptionAdvantagesDisadvantages
Standard Variable Rate

Your monthly repayments rise and fall in line with changes in your lender’s standard variable rate of interest, not necessarily linked to the Bank of England base rate.

The lender does not usually charge an arrangement fee.

There are usually no penalties if you redeem the mortgage – often called early redemption penalties.

You have no certainty over monthly repayments.

Initial monthly repayments will be more expensive than other options with an incentivised rate for an initial period.

Fixed Rate

The interest rate is fixed by the lender for a set period. It will normally revert to SVR after the initial period.

Your monthly repayments stay the same even when interest rates rise.

You can budget knowing what your monthly repayments will be.

Your monthly repayments stay the same even when interest rates lower.

The lender will usually charge a one-off arrangement fee.

There are usually early redemption penalties should you wish to redeem the mortgage during a period set by the lender.

Discounted Rate

Your lender gives you a discount against its SVR for a set period of time. It will normally revert to SVR after the initial period.

Repayments are lower than an SVR mortgage.

You have no certainty over monthly repayments.

The lender will usually charge a one-off arrangement fee.

There are usually early redemption penalties should you wish to redeem the mortgage during a period set by the lender.

Base Rate Tracker

During a set period the interest rate tracks the Bank of England’s base rate. The interest rate is expressed as base rate + x%.

The monthly repayments change every time the Bank of England changes interest rates.

Some are ‘Stepped Trackers’ where the margin between base rate and SVR changes at the mortgage anniversary.

You benefit immediately from any reduction in interest rates by the Bank of England.

Usually repayments are lower than an SVR mortgage.

You have no certainty over monthly repayments.

You suffer immediately from any increase in interest rates.

The lender will usually charge a one-off arrangement fee.

There are early redemption penalties should you wish to redeem the mortgage during a period set by the lender.

Do you need advice?

If you need advice, a qualified and experienced mortgage adviser can help you from start to finish with the mortgage process to help you:

  • Find the most appropriate mortgage and ensure that you do not waste money unnecessarily by paying a higher monthly amount than you need to;
  • Save time and effort by finding you the most appropriate solution;
  • Stop missing out on the most cost effective way of arranging your mortgage.

It is not as simple as looking for the lender with the cheapest rate. A mortgage adviser would undertake a comprehensive review of other key factors that affect the real cost to you. For example, some lenders charge arrangement fees that can be large enough to make the overall cost of lending unattractive, when compared to others.

Other key features of mortgages that you need to consider are:

  • Early repayment charges
    If you wish to repay your mortgage partially or fully during its term
  • Fixed rate
    Would you benefit by fixing the interest rate with the lender for a set period?
  • Annual percentage rate
    What is the real cost of borrowing, not just the interest rate charged?
  • Flexibility
    The ability to overpay, take payment holidays, or switch repayment types
  • Frequency of interest additions
    How often the lender calculates and adds interest to your loan, for example daily, monthly, or annually, can affect the cost of your borrowing.
Your Local Adviser

Your Local Adviser

We work with Alasdair Carroll of FA Wealth who can help you find the most appropriate mortgage.

If you would like a no obligation meeting, call Alasdair directly on 07966 966 448 or fill in the below form and Alasdair will be in touch.

You can learn more about Alasdair here.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Get in Touch

* required fields

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.