Finding a mortgage for you

Taking out a mortgage is a pretty big step, whether it’s your first or you’re moving up the property ladder. As the most sizeable loan you’ll ever take out, choosing which mortgage repayment  is the right type is essential. The choice, whilst at first glance may seem bewildering, is not as complex as it appears. Essentially, there are two key types of mortgages – repayment and interest only. Once you’ve identified the way in which you want to repay the money lent to you, narrowing down the choice becomes easier. It is simply the case of finding the best deal.

How is mortgage money repaid?

You will pay the mortgage in monthly installments, but first you need to decide which option will suit your needs, and what you can realistically afford.

Flexible mortgage – a repayment mortgage with a difference!

Flexible mortgages allow you to increase, decrease or take a temporary payment holiday if financial difficulties arise.

Essentially, flexible mortgages fall under the repayment umbrella. If you were rewarded with a bonus, had a share scheme windfall or had fewer financial outgoings in some months, you could pay off lump sums, gradually chipping away at your mortgage. If disciplined, you could shave years off the length of your mortgage term and save a small fortune in interest payments. Even an extra £50 a month soon adds up.

But if money gets tight, for instance due to loss of earnings, you can reduce, or temporarily stop payments. To do this, you will usually need to have made some overpayments.

Offset Mortgages

An offset mortgage is another way to reduce the overall cost of your mortgage.

With an offset mortgage you take out both your mortgage and a savings account, or even your current account, from the same company. Instead of paying you interest on your savings the amount is used to offset your mortgage loan each time the interest is calculated.

This can significantly reduce the amount you pay over the term of your mortgage; however, as with a flexible mortgage discipline is needed to keep saving.