Types of UK Mortgages

26 Jul 2008 Tell a Friend

Selecting a mortgage can be a difficult and time-consuming task, especially if you have limited funds to put up for a deposit. UK mortgage lenders offer a variety of home loan packages under different names with different interest rates, up-front costs, and small print terms, all of which are subject to change quite frequently. For this reason, you should always use the APR, or annual percentage rate of change, as the basis for comparison, because this rate factors in all the costs.
It's essential to do your homework - if you don?t go into the whole process knowing what you want and how much money you wish to spend initially and over the home mortgage loan term, the variety of different offers may leave you feeling dazed and confused.

There are many different types of UK mortgage options available, each with their own advantages and disadvantages.

Buy to Let Mortgage  A buy to let mortgage allows you to take out multiple mortgages in order to fund the purchase of multiple properties thereby allowing you to grow your property investment portfolio. This type of UK mortgage is useful if you are buying a property with the intention of renting it out. For a buy to let mortgage, your normal income does not calculate into the payments. They are instead based on the amount of rental income you plan to receive by renting the property out.

Repayment Mortgage  A straightforward repayment mortgage is the safest and easiest way to make payments on your UK mortgage. Each month, a portion of your payment will go toward the mortgage repayment itself, and the rest will go towards paying off the interest due. If you make all of your payments in full and on time, your UK mortgage is guaranteed to be paid off by the end of your loan term.

Interest Only Mortgage    An interest only mortgage allows you to make only the monthly interest payment on your loan while the actual mortgage balance remains outstanding. Along with making a payment on the interest of your loan, you will also make a payment into a savings investment. At the end of your loan term, the idea is to have enough money in your savings or investment account to pay off the principal portion of the UK mortgage.