Mortgages Made Easy: Finding the Right Loan for Your UK Purchase

Discover the Different Types of Mortgages in the UK

Several types of loans that include fixed-rate as well as variable-rate and specialist mortgages are easily available for buyers to buy real estate properties in the UK. Some of the common mortgage types are:

1. Fixed-Rate Mortgage: The Most Common Property Loan

This mortgage is the most commonly used finance option to purchase homes and other real estate property across the globe. Lenders offer a standard loan against a fixed interest rate for a fixed term that can be as long as 40 years or as short as 5 years. Borrowers pay monthly instalments including fixed interest rates until all the outstanding amount gets clear. This type of mortgage product is also called a traditional mortgage. This type of loan is easy to acquire as a borrower only needs to maintain a good credit score and show the ability to repay the loan.

2. Adjustable-Rate Mortgage (ARM): A Loan Option with Variable Interest Rates

An Adjustable-rate mortgage is another type of property loan that enables a buyer to secure finance for purchasing real estate properties including homes. The interest rates on this kind of mortgage are set for the first term and then adjusted to reflect changes in the market. This mortgage product offers affordability as the interest rates are usually low for the initial terms and then change periodically. The lender and the borrower can agree upon the maximum amount that the interest rate can be raised by each time.

3. Interest-Only Mortgages

This mortgage plan is also known as an interest-only loan and allows a borrower to pay only interest for the initial loan term. During the early part of the mortgage term, this loan is perfect for lowering monthly payments. However, borrowers need to pay the principal amount at the end of the term. The outstanding amount has to be paid by a borrower either in a lump sum at an established date or in subsequent payments.

4. Reverse Mortgage: Best for Aged Homebuyers

This kind of mortgage is specifically designed for homeowners who are 60 years of age and above. This type of mortgage enables homeowners to access equity in the property to get monthly payments to cater for their retired years. The borrower is allowed to repay only when he or she sells the property, vacates it for good, or dies.

5. Buy-to-let Mortgages: A Loan for Property Investors

This kind of mortgage product is usually recommended for property investors and usually attracts high interest rates. A borrower is supposed to be relieved with a large amount of money for the deposit and is supposed to prove that he can repay the loan. This mortgage is provided on a rental income basis and therefore is suited for investment in rental properties.