In the UK, there are several different types of mortgages available to borrowers. Here are some of the common types:
1. Fixed Rate Mortgage: This type of mortgage offers a fixed interest rate for a set period, typically 2 to 10 years. The monthly repayments remain the same throughout the fixed-rate period, providing stability and predictability.
2. Variable Rate Mortgage: With a variable rate mortgage, the interest rate can fluctuate over time based on changes in the lender's standard variable rate (SVR) or the Bank of England's base rate. The monthly repayments can go up or down, depending on the rate changes.
3. Tracker Mortgage: A tracker mortgage is tied directly to a specific interest rate index, typically the Bank of England's base rate. The interest rate on the mortgage fluctuates in line with changes in the chosen index, plus a fixed percentage.
4. Discount Mortgage: This type of mortgage offers a discount on the lender's SVR for a certain period. The interest rate will be lower than the SVR during the discounted period, but it can still change as the SVR changes.
5. Offset Mortgage: An offset mortgage links your savings or current account balances to your mortgage balance. The interest on the mortgage is calculated based on the difference between your mortgage balance and the amount in your linked accounts. This can help reduce the overall interest paid and shorten the mortgage term.
6. Buy-to-Let Mortgage: Designed for individuals who want to buy a property to rent it out, buy-to-let mortgages differ from residential mortgages. The interest rates and eligibility criteria may vary, and lenders typically consider potential rental income when assessing affordability.
7. Interest-Only Mortgage: With an interest-only mortgage, you only pay the interest charged on the loan each month. The original loan amount remains unchanged, and you're required to have a repayment plan in place to pay off the capital at the end of the term.
8. Equity Release Mortgage: These mortgages are specifically for older homeowners who want to release equity tied up in their property. They allow you to borrow against the value of your home, typically without monthly repayments. Instead, the loan is repaid from the proceeds when the property is sold.
These are some of the main types of mortgages available in the UK, but it's important to note that mortgage products can vary between lenders, and each lender may have its own variations and terms. It's advisable to seek advice from a mortgage advisor or broker to find the most suitable option for your circumstances.