Which mortgage is right for me?
We’ve put together some key points about different types of mortgages, so you can get informed about what is available to you. If you are thinking about taking out a new mortgage, this is a simple starting point. Some important things to keep in mind are:
How long do I plan to own this property?
What financial changes can I expect in the future?
Should I bring capital gain into consideration?
This is not a comprehensive guide so you may still have questions about your finances, or the fine print of each kind of mortgage. Queries like these are what we are here for, so please get in touch with us if there’s anything you would like to know.
Different Types of Mortgages
There are many kinds of mortgages, all with their own distinct benefits. Here are the most common ones:
This kind of mortgage requires equal payments over the whole mortgage term. Sometimes referred to as a “Table” mortgage.
Pros: Payments remain fixed, subject only to changes in interest rates.
Cons: Repayment of loan balance occurs slowly, picking up only when borrowers are well into their loan term.
With this kind of mortgage, payments start at one amount but reduce by the same small increment with every payment.
Pros: Interest is calculated from the money you owe: the less you owe, the smaller your payments get.
Cons: Initial repayments are higher than equal payment mortgages.
An Interest Only mortgage is often called a “Flat” mortgage. This is because borrowers only pay the “flat” interest rate and nothing else.
Pros: Lowest loan repayments means maximised cashflows for investors.
Cons: The total sum loaned does not decrease with Interest Only Mortgages.
If a borrower commits to paying more than the requirement of the lender, their mortgage gets advanced and is paid off in less time.
Pros: Lowest interest cost and shortest term of any full-term mortgage type. There is also flexibility to return to the lender-required minimum.
Cons: Maintaining voluntary payments isn’t realistic or easy for everyone.