Fixed Rate Mortgage

A fixed rate mortgage gives you a preset rate of interest over an agreed period, usually between 2 and 5 years with most lenders, meaning that your repayments will not alter on a month-to-month basis during that time. Fixed rate mortgages offer stable repayments and protection against rising interest rates, but they don't result in any benefits if the interest rate happens to fall below the agreed fixed rate.

Capped Rate Mortgage

Capped rate mortgages set a maximum interest rate for a set term, which cannot be exceeded regardless of fluctuations, safeguarding against unexpected rises. The allows you to be fully aware of the maximum repayment level that you could be committed to during the period, while also passing on the savings of any possible interest rate reductions.

Discount Rate Mortgage

A discount rate mortgage gives you reduced repayments over an agreed period, by giving a discount on a variable rate for a given period. This is an incentive-orientated arrangement that gives a specific discount on the standard variable rate set by the Bank of England for a period, before reverting to the standard variable rate. Repayments vary in line with interest rates.

No Deposit Mortgage

With a No Deposit Mortgage you borrow the full value of the property, and are not required to fund a deposit of any kind. Interest rates can be variable, fixed, capped or discounted depending on the particular lender's product. Without the need for a deposit, a No Deposit Mortgage can offer an initially lower cost option compared to other mortgages, however the possible downsides can include negative equity in the event of a housing market slump, and potentially above-average interest rates on repayments.

Variable Rate Mortgage

A variable rate mortgage charges you interest in line with the Bank of England's base rate, meaning that the payments can vary - up and down - with any adjustments. Variable rate mortgages offer the benefits of falling base rate, which result in lower repayments, but don't provide protection against rising rates.

Buy-to-let Mortgage

Buy-to-let mortgages are used for properties that will be let out to tenants in the private rental market, and not used for regular residential purposes. Buy-to-let mortgages are assessed much in the same way as other mortgages, based on the applicant's income and affordability, but unlike other mortgages the forecasted rental income is also taken into account. Therefore the business potential of a particular property plays a key role in buy-to-let mortgages.

Buying to let can be a very lucrative investment in the right situation, check out our dedicated buy to let section for more information.

Current Account and Offset Mortgages

This type of mortgage is effectively a flexible mortgage arrangement combined with a current account. Money in the account is set against the mortgage balance and interest is charged on the outstanding amount, reducing interest payments. An offset mortgage works in a similar way but allows you to keep your different balances in separate accounts, although offsetting them against each other and possibly lowering the interest paid. Current account and offset mortgages can result in the mortgage amount being repaid early.

Tracker Mortgages

Tracker mortgages are a type of variable rate mortgage where the interest is set at a specified percentage above or below the Bank of England's base rate, over an agreed period. This results in repayments that alter in line with any base rate fluctuations.

Cashback Mortgages

Cashback mortgages give you a cash rebate on the completion of the loan, which can calculated either as a percentage or a fixed amount. In a cashback mortgage agreement there are often penalties for early repayment.

Flexible Mortgages

Flexible mortgages allow you to make overpayments when you may have extra funds, or reduce repayments and take repayment 'holidays' when necessary. They are generally offered on a daily interest basis. Typical flexible mortgage deals require you to 'build up' a reserve through overpayments prior to taking any reductions or repayment breaks.

Remortgages

A remortgage is when a homeowner pays off the remainder of one mortgage with the funds from a new mortgage using the same property as security. Remortgaging is used to release equity that's locked up in your property and raise capital for most purposes.