Whether you’re a first-time buyer or an existing borrower; owning your own home is a big accomplishment. Your home may be the biggest financial commitment you have, so finding the right mortgage to meet your needs is essential. With a wide range of mortgages available on the market, understanding the differences between them is important.
How does a mortgage work?
Mortgages may feel daunting, but they tend to work the same way. A standard mortgage is a large loan, taken out with a bank or building society, secured against the value of your home until it’s paid off. The loan will typically run for a period of 25 years and during this time, you’ll be expected to pay back the amount you’ve borrowed, plus interest by making regular monthly payments.
Types of mortgage products
When taking out a mortgage, there are a range of products on the market, the main two options being a fixed or discounted rate product. A fixed rate means the interest rate is set for the product term, normally between 2 to 5 years. A discounted rate means you’ll pay a rate discounted from the lender’s Standard Variable Rate (SVR). The SVR could change during your product term, meaning the amount you pay can you go up or down.
There are different ways a mortgage can be repaid; repayment means your monthly payment covers an element of capital and interest and as long as you make every payment on time, the mortgage will be repaid at the end of the mortgage term, or earlier if you overpay your mortgage (your lender may have limits on how much you can overpay each year).
Interest only means your monthly payment will only pay the interest on the loan, so you’ll need a plan in place that is acceptable to your lender which will pay back the full loan amount (the capital) at the end of the mortgage term. Getting the right product, term and repayment method depends on how much financial security you need, your personal circumstances and future plans.
Types of borrowers
If you’re buying a home and do not own another property, you may be eligible for lower deposit mortgage products or government schemes, such as ‘Help to Buy’ or Shared Ownership.
Retirement mortgages are available and could be suitable for those in later life looking to move to a new home or remortgage their existing property. Because of the demand for mortgages in retirement, you may find lenders offering options for those who’d like to borrow into their 50s, 60s, 70s and even 80s. There are also Retirement Interest Only (RIO) mortgages; an alternative to equity release designed for those who want to remain in their home with no plans to downsize.
You’ll also find options available if you’re a UK citizen residing overseas, looking to buy a home for your family or own a UK Buy to Let property – just look for lenders who offer expat mortgages.
If you already have a mortgage and you’re looking to move or remortgage, most lenders will have a standard range of residential products available.
How can the Marsden help?
We have a range of mortgages available for those looking to borrow in retirement and expats. Our dedicated mortgage team can offer free advice, assist with any questions you may have and recommend the product that’s right for you.
Please call 01282 440500* or visit our dedicated ‘Mortgages’ page to find out more.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.