Which Is The Best Mortgage For You?

This handy guide will give you a very basic overview of the most popular types of mortgage available, including Repayment Mortgage, Interest only Mortgage, Buy to let Mortgages, and First Time Buyer Mortgages, and hopefully provide you with a better idea of which route you would like to take.

Repayment Mortgages

These types of mortgages are the best, especially if you want the piece of mind that at the end of your mortgage term, you will have paid off the entire mortgage, including interest. This is because, each monthly payment that you make to your mortgage provider will pay off both the capital amount borrowed as well as the interest made payable on the outstanding balance. Being able to pay both off in the same payment means that at the end of the mortgage term you won’t have any nasty surprises.

Interest only Mortgages

The interest only mortgage means that any monthly payment that you make to your mortgage provider will be for the interest only and not the capital amount that has been borrowed as part of the mortgage. Hence, the mortgage balance does not decrease. At the end of your mortgage term, you’re still left with a big balance to pay off.

The additional savings that you make from paying the interest only of the mortgage means that you can put aside some money into an investment account; this account should ideally have accumulated enough money for you to be able to pay off your mortgage at the end of the mortgage term.

However, with all investments, there is always a risk, the biggest risk being that you may not have accumulated enough savings to be able to pay off your capital mortgage. Hence, interest only mortgages are not recommended as they can leave you in more debt that you might think.

Buy to Let Mortgages

If you are thinking of buying a second property (especially with the recent drop in house prices), then a Buy to let mortgage is something that you will need to consider taking on. However, before making an investment in a property, you need to think outside the box a bit, think about your target market, the location in which you need to buy the property in and finally, the total amount you are willing to spend on the property. After taking all these things into consideration, you can then start house hunting within your budget. There are specific rates and deals that mortgage providers can offer on a Buy to Let purchase and they all range from interest only to repayment methods. The only thing that makes a Buy to Let Mortgage distinct is the lending criteria used to determine how much you can borrow.

The amount you can borrow is worked out based on the deposit you put down and of course the expected rental income that you will receive from the property. Most mortgage providers require a larger deposit on Buy to Let purchases and they only lend the money, if the rental income is a certain percentage above the monthly repayments.

First Time Buyer Mortgages

Buying a property for the first time buyer is a really big commitment. For a first time buyer, it is always best to have a large deposit on hand. Most mortgage lenders are willing to accept up to 10% deposit, however, you are likely to be able to get a better mortgage deal if you can provide a higher deposit, it also means that you end up borrowing less, hence, less of a debt than if you had to pay back 100% mortgage.

Most lenders will also have special deals available for first time buyers. Please make sure that you are not paying any additional booking fees to be able to get a particular mortgage deal. If you have to pay a booking fee, make sure it is worthwhile.