What types of mortgages are

What Types of Mortgages are there?

iStock_000017138242SmallThere are literally thousands of different types of mortgages on the market, and choosing one can be daunting. But before deciding which mortgage to go for, you need to decide what type of mortgage to get – repayment, interest only, fixed, tracker or discounted. Which one is right for you depends on your circumstances. Get the wrong one, and it could cost you thousands.

To find out more about the basics of how mortgages work, see Mortgages made simple

To find out more about the best way to get a mortgage, see How and when should I get a mortgage?

Need some help deciphering it all, see

For specifics on remortgaging, see

If you are looking at mortgage options later in live,

Should I go for a repayment or an interest-only mortgage?

For the vast majority of people, repayment mortgages are best – they guarantee you are paying off your debt, and ensure you will have repaid the mortgage at the end of its term.

Interest-only mortgages were very popular a few years ago, primarily because the monthly costs were a lot less, since you don’t repay a chunk of capital each month – you only pay the interest. However, in more recent times, with tighter lending criteria, it is becoming increasingly difficult to take out interest-only mortgages.

Interest-only mortgages were particularly appealing for those who were already struggling with high monthly outgoings or those who were mortgaged to the hilt. But the obvious downside with interest-only mortgages is that at the end of the mortgage period, you will still owe the mortgage lender the value of the mortgage. All mortgage lenders recommend that borrowers with interest-only mortgages save money elsewhere, so that when the mortgage comes to an end they will be able to repay the debt.

Interest-only mortgages can be attractive if you are expecting a big lump of money in the future (such as a work bonus, inheritance, or sale of business), or if you are happy to sell your home when the mortgage comes to an end. Many people with interest-only mortgages repay lumps of capital as they go along – if you have an uneven income, it can be a useful way to control how much capital you repay when you are able to. But many find it difficult to pay as much capital as is needed.

If you have an interest-only mortgage, you may be able to remortgage again to put off the day of reckoning, but at some point you will have to settle the bill – and this might mean you have to sell your home to do so. There is a lot of concern that people who have taken out interest-only mortgages haven’t planned adequately, and will be forced to sell their home against their wishes to pay it off. See our guide on dealing with problems people encounter with interest-only mortgages.

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How to get the best mortgage rates - Quora

I agree with Michael Cheng. If you have a great credit score, stable, verifiable income, verifiable cash on hand or assets, you are a dream client. By comparison shopping, you will be able to obtain a Loan Estimate from at least three different types of lenders: Talk with the mortgage department of where you currently bank. You already have a banking relationship with them. This is a good place to start. Next, apply with a local, licensed non-bank mortgage lender. Somebody located in the town in which you live.  Last, apply with a local mortgage broker.

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