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Getting a mortgage can be scary, but it doesn’t have to be.

Here at The Mortgage Heroes, we understand that mortgages can be quite confusing. Thats why we’ve put together this handy page of frequently asked questions.

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Whether you are choosing a mortgage for the first time or the last time, there are many factors that should be considered and every situation is different.

Mortgages are typically your largest financial commitment, so it is vital that you make the right decision on which type of mortgage is right for you. The lowest interest rate doesn’t always mean it’s the best mortgage for you!

Fixed rate mortgages are the most popular type of mortgage because this provides peace of mind that your mortgage rate is fixed for a set number of years. This is typically 2, 3 or 5 years but some lenders have been previously known to offer a 10 year fixed rate. You know exactly how much you’ll be paying each month for that length of time, regardless of whether the interest rates change.

Tracker mortgages vary with the interest rate set by the Bank of England base rate. The rate you will pay is a set interest rate which can be above or below the base rate set. When base rate goes up or down, your mortgage rate will change by the same amount. In essence, they move simultaneously

This mortgage type is similar to a tracker mortgage, but variable rate mortgages are not linked to the bank of England base rate. However, their variable rate will be influenced by the Bank of England base rate and a number of other factors. The individual lenders will decide what their variable rate is and this can differ from lender to lender.

The discount is a reduction on the lender’s standard variable rate (SVR). Therefore, if the lender’s variable rate is 4% and the discounted rate offers a 1% discount, the initial rate would be 3%. This rate can change at any point though as this is, in essence, a variable rate mortgage with an initial discount.

This is a variable rate mortgage that offers a cap on how high your interest rate can rise.  This provides a certain element of security knowing that there is an upper limit in place for how high the interest rate can go.

Offset mortgages are linked with a savings account, combining both savings and mortgage.

On a monthly basis, the lender reviews how much you owe on the mortgage and deducts the amount you hold in savings. Your mortgage interest is calculated based on the difference between the total loan amount and your total savings.

Example: You have a mortgage of £200,000 and savings of £10,000, your interest is £190,000 for that month.

Flexible mortgages provide you with flexibility with regards to payments.

You can overpay more than your usual monthly payment on your mortgage (which you can also do on other mortgage types).  However, unlike other mortgages, if you have already overpaid you can pay less for a limited time.

With an interest only mortgage, you simply just pay the bank interest each month with this type of arrangement you would need a repayment vehicle in place such as savings so that you could repay the debt at the end of the mortgage term. If you don’t have a suitable repayment vehicle in place at the end of the mortgage you may have to sell your property to repay the loan to the bank.

Most mortgage contracts are set up on a repayment basis, the way they work is each month you repay some of the interest you owe plus some of the capital you’ve borrowed. At the end of the period, often 25 – 30 years, you’ll have paid back everything you owe and you’ll own your home outright.

This is simply a mixture between capital repayment and interest only, this typically works by selecting the amounts you want on the interest only element using a percentage for example 50/50, so 50% is on interest only while the other 50% is on capital repayment.

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