How do I choose a mortgage?

There is a huge array of different types of mortgage in today’s market so it can be quite tricky making the right decision.

Start by carrying out some research into the mortgage market and get to know some of the options open to you. To help you, the following describes in a very basic format, the main choices available to you. We have gone into all these subjects in more detail in the other FAQs you’ll find on this site.

The first question is - do you want an Interest Only or a Repayment Mortgage?

Repayment Mortgage - the capital and interest are both combined and you pay them off as a single monthly payment throughout the mortgage term.

Interest Only Mortgage - you pay back the interest directly to the mortgage lender over the mortgage term and arrange another savings vehicle which will raise the sum needed to pay back the capital at the end of the mortgage term.

Types of interest rate

Variable interest – Variable interest rates are the norm. Your rate of interest on your mortgage moves in line with the Bank of England base rate. Variable rate mortgages are very good if the interest rates go down, but if interest rates rise, your monthly payments will go up.

Fixed interest - your interest rate is fixed and will not change. This means that if interest rates fall you won’t get the benefit although if they rise you are insulated from that rise and your monthly repayments remain the same. Some mortgage contracts start with a period in which rates are fixed and then revert to variable rates.

Deciding what type of interest rate to choose is one of the most vital decisions you will have to make. We suggest that you seek professional mortgage advice before making your final decision. This service is provided through the mortgage brokers we partner with.