One minute mortgage guide

Fixed-rate Mortgages
These charge the same rate throughout the period of the fix. They are useful for people who want to know exactly how much they have to find over a given period.

Tracker Mortgages
Trackers are linked to base rates, and discount mortgages to standard variable rates, and both are particularly attractive when rates are falling. Tracker mortgages may also benefit those borrowers who reckon that interest rates will come down in the months ahead.

Capped Mortgages
These put a ceiling on how high the interest rate can go, but you pay a lower rate if the standard variable rate drops below the level of the cap. They therefore offer the security of knowing that your monthly repayments are fixed at the top end, but will benefit from any falls in the standard variable rate. Capped loans have come under fire in the past for effectively being little more than fixed-rate loans that charge higher rates than conventional fixes.

Discount Mortgages
Discounts peg rates at a set percentage below the lender's standard variable rate (SVR). Many discount mortgages have no redemption penalties during the tie-in period, allowing you to remortgage if a better deal comes along.

ISA mortgages
ISA-backed mortgages have not yet caught the imagination of the mortgage consumer. The advantage of these packages is that you have the facility to choose your own ISA provider and you can, if you choose to, regularly review the performance and switch funds or change provider if the performance has not been satisfactory.

Offset Mortgages
Offset mortgages allow customers to combine their savings and debts, in order to reduce the amount of interest owed. Rather than being paid interest on their savings, the sums saved in these accounts will be used to reduce the interest owed on their mortgage and any other loans.

Current Account Mortgages
Current account mortgages enable borrowers to combine mortgage and savings in a single account. Their main advantage is that money paid in, or interest earned on existing balances, is credited to the mortgage, reducing the debt and, consequently, interest charges.

Self-certification mortgages
Self-cert mortgages ease the burden of proof. To qualify for a home loan borrowers just need to sign a statement of earnings, not provide actual proof.

However, there can be some catches. For instance, first-time buyers and new business owners may be turned away. Unless a self-employed person has been trading for at least one, usually two, years, they generally cannot just sign a statement of earnings. There is also a credit check, on which first-time buyers may score too low to qualify. The majority of self-certified mortgage lenders demand a 25 per cent deposit; a small minority will accept a 15 per cent deposit, and an even smaller minority 10 per cent.

Sub Prime Mortgages
These loans, also called credit repair mortgages, are sold to people who typically have a poor credit record and charge a higher rate of interest because the borrower is considered a more risky bet. There are different levels of sub-prime mortgage. Someone who has a very bad credit rating - they may be a discharged bankrupt or have a lot of county court judgements against them - will be sold a "heavier'' version. Someone who has missed a couple of mortgage or loan payments in the past will often be sold a "near-prime'' or "light'' version of the mortgage. Sub-prime mortgages can charge as much as three percentage points more than an average standard variable rate mortgage, but it will depend on your credit rating.

If you would like to find out more, please email or contact us for further information.

This article is for your general information and use only and is not intended to address your particular requirements. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Your home may be repossessed if you do not keep up repayments on your mortgage.

Article date: 09.07