Mortgages explained simply.
A mortgage is a loan used to purchase or refinance a property. The property acts as security for the loan, meaning the lender may repossess it if you fail to keep up with your mortgage repayments.
The main types
Repayment
Interest-only
Fixed-rate
Tracker
WHAT IS A MORTGAGE?
Mortgages explained simply
Most people take out a mortgage because they do not have the funds available to purchase a property outright.
For example, if you wanted to purchase a property for £300,000 and had a £30,000 deposit, you might need a mortgage of £270,000 to complete the purchase.
You would then repay the mortgage in accordance with the agreed terms, usually through monthly payments.
The amount you can borrow, the interest rate available and the type of mortgage suitable for you will depend on several factors, which may include:
- Your income and employment circumstances
- Your existing financial commitments
- Your credit history
- Your available deposit or property equity
- The type and value of the property
- The lender’s affordability assessment and lending criteria
TYPES OF MORTGAGE
Different types of mortgages
Repayment mortgage
Your monthly payments cover interest and gradually reduce the amount borrowed. Provided you maintain all required payments, the mortgage should be repaid by the end of the agreed term.
Interest-only mortgage
Your monthly payments generally cover the interest charged rather than reducing the original loan balance. You will need a credible repayment strategy to repay the capital when the mortgage term ends.
Fixed-rate mortgage
The interest rate remains unchanged for an agreed period, helping you understand what your monthly mortgage payments will be during that time.
Tracker mortgage
The interest rate follows a specified benchmark, usually with an additional percentage added by the lender. Your payments may increase or decrease as the benchmark changes.
Different mortgage products can involve arrangement fees, early repayment charges, variable rates and other conditions.
Our role is to explain the relevant options, costs and risks so you can make an informed decision.
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Your home may be repossessed if you do not keep up repayments on your mortgage.