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What is a mortgage?

A mortgage is a loan you take out to buy a property. Mortgages are provided both by banks and building societies, and by specialist mortgage lenders.

Taking out a mortgage is one of the biggest financial commitments you’ll ever make. However, it needn’t be a terrifying one. We have  mortgage information guides,  mortgage glossary, tools and news updates to help you find the right mortgage.

Our mortgage advice sections also cover commercial and business mortgages and  inheritance tax.

Below we also consider what sort of buyer you are; how interest is charged; the way you pay; how to apply for a loan and provide a calculator for you to find out how much you'll be paying each month.

It can help to chat through your options.  By filling out the form below you can get free advice from a specialist mortgage advisor, or you can compare some of the best mortgage products in the market by clicking here.

Lender Initial Rate Duration Standard Rate Overall Cost For Comparison Max Loan To Value Fee
  • HSBC Special 60% LTV

1.99% To Jan 2014 3.94% 3.7% APR 60% £999
  • ING Direct

2.25% To Nov 2013 3.5% 3.4% APR 60% £1,945
  • Leeds BS (Direct) 2yr

2.45% 2 years 5.69% 5.4% APR 75% £999
  • Norwich & Peterborough BS

2.49% 2 years 4.99% 5% APR 85% £995
  • Leek United BS

2.49% 2 Years 5.19% 4.9% APR 75% £495
  • Monmouthshire BS Direct Purchase

2.49% 2 years 4.99% 4.7% APR 70% £499
  • Hinckley & Rugby BS Remortgage

2.59% 2 years 5.64% 5.1% APR 75% £990
  • Clydesdale Bank Purchase

2.59% To Dec 2013 4.59% 4.5% APR 65% £999
  • Market Harborough BS

2.65% 3 years 5.49% 4.8% APR 75% Nil
  • Mansfield BS

3.29% 2 years 5.59% 5.2% APR 80% £999
  • Melton Mowbray BS

3.35% term 4.99% 3.5% APR 75% £99

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What sort of buyer are you?

There are several different types of mortgages available in the UK, and various different ways you can repay them. The deal that’s right for you will depend on the kind of buyer you are and your individual financial circumstances.

For example, are you a first time buyer or are you remortgaging an existing property? Maybe you need to know about shared ownership schemes that help you buy your home

Perhaps you are looking to move home and need a bigger mortgage to buy a more expensive house or you're trading down to a smaller property once your family have left home.

Or if you want a mortgage for a property you’re planning to rent out you need a buy to let mortgage.

How interest is charged

Different types of mortgages charge interest in different ways. Fixed rate mortgage deals, for instance, have rates that are set for typically two to five years though they can be longer.  They tend to be the most popular option.

On the other hand, variable or tracker mortgage deals have interest rates usually related to the Bank of England base rate.

The rate can be capped so that it never goes above a certain rate agreed at the outset. Or it can have a collar meaning it can't drop below a certain level, but these are rarer.

Discount variable rate mortgages typically offer a discount on the lender's standard variable rate.

The way you repay

There are two main options when it comes to paying off your mortgage: a repayment mortgage or an interest-only arrangement.

With a repayment mortgage your monthly payments will go towards clearing both a proportion of the interest and the amount you borrowed.

But with an interest-only mortgage your monthly repayments are only covering the interest charged on your borrowing.  You will have to make other arrangements to pay off the original loan.  In the past, you used to have to prove to your lender how you would clear the debt. The City watchdog, the Financial Services Authority, has turned the spotlight on these home loans because it is concerned that lenders and homeowners are not ensuring they have a way of paying off the capital.

Offset mortgages combine both methods while also letting you use your savings and current account credit balance to offset some of your mortgage.

How to apply for a mortgage

There are two ways you can apply for a mortgage: you can approach a mortgage lender directly or you can go to a broker.  Our mortgage brokers directory has a list.

A good mortgage broker who will check the whole of the market for you should have the knowledge and experience to help you find the best deal. They can't always search all mortgage deals as some are only available directly from the lender. And do be aware that some mortgage brokers charge fees.

For an international mortgage or overseas mortgage for investment properties or holiday homes in Australia, Bulgaria, Canada, Caribbean, Cyprus, Florida, France, Greece, Ireland, Italy, Malta, Poland, Portugal, South Africa, Spain and the USA.  To make an enquiry please click here.

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