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What are The Different Types of Mortgages Available in Sheffield?

Mortgage Advice in Sheffield

At the start of your mortgage journey, you will come to realise there is a range of different types of mortgages. 

Whether you are a First Time Buyer looking to get onto the property ladder, thinking of Moving Homes in Sheffield, or your term has ended, and you want to know your Remortgage options. Understanding the different types can help find you the most suitable choice that fits within your circumstances when living in Sheffield. 

This article will feature a comprehensive list of the most popular mortgage types available to most customers when looking into their options along their mortgage journey.

For more information regarding these types, please book your free mortgage appointment online today to speak to one of our expert Mortgage Advisors in Sheffield. Our advisors are on hand seven days a week, ready and waiting to try their very best to help you with your mortgage scenario.

What type of mortgage to choose?

Something to contemplate when buying a property is the type of mortgage you take out. The most suitable mortgage for you will depend on your circumstances, plans, and whether you choose to live in or rent out the property. Feel free to use one of the jump links below to go to a specific spot in the article;

Fixed-Rate Mortgage

A fixed-rate mortgage is when your interest rates are on a fixed agreement between you and the lender. This fixed payment can span over a few years. Most buyers and owners usually opted-in between 2 to 5 years or longer.

Choosing this option will lead to your mortgage payment will stay the same throughout this period, even though any economic changes such as interest and inflation, so you can rest assured that you will have no differences with your payment.

Tracker Mortgage

Unlike a fixed-rate mortgage, a tracker mortgage doesn’t have a set rate between you and your lender. But instead, the interest rate will alter depending on the Bank of England’s base rate so that interest rates can fluctuate at any time.

For example, if you are repaying your mortgage, and the Bank of England base rate is 2%, while you are tracking a 2% above base rate, this means the overall rate you will pay back is 4%.

Repayment Mortgage

A repayment mortgage involves paying a combination of interest and capital each month. Over time, the property will eventually become yours if you keep up to date on the mortgage payments.

This method can be described as the most risk-free way to pay back your capital to the mortgage lender. At the start of your mortgage journey, interest becomes your principal payment. If you have taken out a much larger term like 25, 30 or 35 years, your balance will reduce slower.

Later on in your mortgage term, your payment methods will change to paying off more capital than interest, and your balance will lower at a quicker rate.

Interest-Only Mortgage

An interest-only mortgage is a payment method that involves you only paying the interest per month. Whilst that sounds ideal, this means that the borrowed amount has to be paid back in its entirety by the end of the term.

Many Buy to Let Mortgages are seen to be on an interest-only basis. However, getting a residential property on an interest-only basis is nearly unheard of these days due to the complicated criteria that need to be met.

There are circumstances where this may still apply, with reasons including; downsizing your property when you’re older or paying back capital through other investments.

Lenders can be strict when offering these products, and the loan to values is a lot lower than in previous years.

Offset Mortgage

An offset mortgage is a blend of a conventional mortgage account with a savings account that runs alongside it. This mortgage type can allow you to be flexible by regularly paying in your offset account or withdrawing funds if needed. 

This is seen as the more appealing type of mortgage as it allows you to have a savings account opened alongside your main account. An example of this is if someone took out a £100,000 mortgage, but in your savings, you have £20,000. You can put this into your new savings account and pay the interest on the remaining amount, which would be £80,000. 

The potential option is to pay off your mortgage earlier if you keep your payments as expected. 

Capped Rate Mortgage

A capped rate mortgage involves the customer making repayments each month with a maximum interest rate like fixed-rate mortgages. However, this type has a restricted percentage so that you won’t be paying any higher than the agreed percentage. For example, if you’re capped at 5%, your rate will never go above 5%. 

This type can be beneficial if interest rates reduce, as your mortgage rate will follow this reduction. This should reflect in lower monthly mortgage payments.   

Flexible Mortgage

This type of mortgage allows you to be flexible with your payments and either underpay or overpay any amount. You can only underpay if you have overpaid the first time and have agreed to do this with your lender.

Overpaying your mortgage can be helpful if you want to pay your mortgage off early and pay less interest.

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