What different types of mortgages are there?

December 30, 2021 12:00 pm


There are several ways that you can repay the mortgage you take out to buy your dream home and a number of different term lengths. A term is defined as the length of years that the mortgage is due to run. In the past, it was common to set these for 20 to 25 years, however the modern mortgage market, and the changes to the UK as society has seen longer terms, some even running to 40 years.

In general, lenders will work towards the state retirement age of 65 to 68 depending on your age. The most dominant factor in deciding the term of the mortgage now is the declared budget that you have. This is discussed with your Mortgage Advisor during your application processes. It pays to get ahead as early as you can with a mortgage and house purchase so getting House Survey news and updates from Sam Conveyancing should be a must to be ahead of any changes in the industry.

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There are essentially 3 ways to repay the mortgage debt over the term. The first two options are becoming increasingly rare to obtain and they are usually to be found with the more fringe or specialist lenders and not the main banks and building societies.

Interest-only –  Once a popular choice, as the monthly payment is low, this option only makes the interest payments and the original amount you borrow does not decrease. Therefore, for example, if you borrow £180k over 20 years you will still owe that £180k at the end of the term. Lenders ask for evidence to repay it.

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Offset – This allows you to run a savings scheme alongside the mortgage. At times you can miss or make extra payments.

Repayment – This pays the capital and the interest so that the whole amount is cleared over the term. This is the only way to be sure the mortgage is over by the end of the term.