All About Uk Mortgage Types

The following article is intended to help educate you about mortgages in the UK. If you don't understand the language of the UK mortgages market then you will have a grave isadvantage when thinking about the appropriate type of mortgage for you.

The glossary below is intended to explain the differences between the numerous "flavors" of mortgage loan available to UK property buyers with a view to helping them determine which would be the right one for them and their financial situation.

The Different Types of UK Mortgage

Interest Only - An interest only mortgage will enable you to borrow money and repay interest only for the duration of the loan. At the end of the loan period the full amount of the sum borrowed has to be payed off.

Repayment Mortgages - The monthly mortgage payments with this mortgage include both interest and capital payments. At the end of the agreed term the loan is deemed to be paid up.

Endowment Mortgages - An endowment mortgage is effectively an mixture of an interest only mortgage with an endowment policy that is set to pay off the capital amount borrowed at the end of the term.

Mortgage Pensions - Like an endowment mortgage, pension mortgages are also a blend of an interest only loan which is paid up upon retirement when the borrower's pension fund can cover the mortgage.

Investment Backed Mortgages - An interest only arrangement that requires some type of investment to pay off the mortgage amount at the end of the agreed term. Examples of investments could be an ISA (Individual Savings Account), a PEP (Personal Equity Plan) or any other kind of investment.

Adverse Credit Mortgages - A specific type of mortgage targetted at people who have bad credit.

Offset - An offset mortgage will allow you to lower your interest payments by off setting a credit balance.

Foreign Currency Mortgages - Your mortgage amount is translated into a foreign currency to decrease interest payments by utilizing exchange rate variances.

Flexible - Gives you the flexibility to make over payments without earning an additional charge.

Buy-to-Let - A type of loan designed to help you to buy a property that you want to let to tenants.

Let-to-Buy - A type of loan designed to help you to let your current property so that you may buy another.

Non-Status Mortgage Loans - A kind of mortgage where your income does not play a part in determining how much can be borrowed.

Traditional Forms of Interest Linked to Mortgages

Fixed Rate - These are rates that remain fixed for an agreed time. This will most likely be 2, 3, 5 or 10 years. Longer term fixed rates will generally be more costly and also less popular than smaller fixed terms.

Standard Variable Rate - The SVR (Standard Variable Rate) is a default rate of interest offered to people who are seeking a mortgage.

Discount Rates - Discount rates occur when there has been a significant period of time in which the SVR has been low. This time period is normally calculated over 1 to 5 years.

Variable Rates - Variable rates are the antonym of fixed rates. Rates in this kind of interest agreement are qualified according to the lender's discretion.

Capped Rates - Capped Rates have many similarities to fixed rates in the sense that interest will not change higher than a certain limit. However beneath this limit the rate can be variable. Some capped rate shemes also include things called collar rates which will also fix a lower floor rate that will not vary.

Tracker Rates - Tracker Rates are connected to the Bank of England Base Rate.