Different Mortgage Solutions

Mortgage solutions sound pretty straight forward at the start - you borrow money to buy a home and pay the loan back monthly. Well, if you've ever enquired about a mortgage then you'll have realised it's actually not that simple at all.

The market is filled with various different mortgage solutions, interest rates and deposit types. It can be quite a confusing maze the tackle, but to help you out a bit we've listed some basic information about mortgages. First, here's two terms you may come address but might not understand:

Paying back capital: There are two types of repayment mortgages. You have the repayment mortgages, where you pay a little as you go (monthly repayments) or an interest only/endowment mortgage where you pay the majority off at the end. A repayment mortgage is only cleared at the end of the repayment term. The "capital" normally refers to the loan amount you took out originally.


Types of Mortgage Solutions


Interest Only Mortgage: With this type of mortgage you pay off the interest of the loan monthly but not the capital. At the end of the term, you're expected to pay off the capital. So if you borrowed £250,000, you will only pay monthly for the interest and have to pay the full £250,000 at the end of the term. How you come up with the money for this capital is entirely up to you.

Endowment Mortgages: Endowment mortgages uses an endowment policy to save funds to repay the loan at the end of the term. This is an investment and relies on the market, much like a pension only a little more tied to the housing market, so it could leave you short at the end of your term even if you're very precise with your savings.


Interest Mortgage Solutions

Variable Rates: Variable rates is when the interest on the loan "varies" according to the going rate, so you might not be paying a fixed amount every month. The interest rate is normally tied to the Bank of England rates.

Fixed Rates: The rate for these mortgage solutions are fixed for a certain period and may change to a variable rate or go up. However, don't be tempted by enticing introductory fixed rates as these could increase significantly after the stated period.


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