There are different types of mortgages, classified by the way the interest on them is charged, or how the interest rate changes over time.




Each has its own benefits and negatives. You will have to shop around, consider all types of mortgages, see what is on offer, and work out which one benefits you the most.

Mortgage interest rates

In order to make a profit on the money that they lend out, banks charge interest.

Interest is charged as a percentage of the total amount borrowed. For example, a £1,000 loan with 4% interest per month will require an extra £40 to be paid back every month, on top of payments going towards repaying the initial £1,000.

As a mortgage for a property is a very large loan, the interest can add up to a lot amount. You need to pay attention to the interest rates on any mortgage, and the types of interest that there is.

Some mortgages have interest which stays the same for a set period of time (such as two year or five year fixed rate mortgages). Other mortgages have interest rates that can change as time goes by. Make sure you know what you are buying into.





Joint mortgages

In a lot of cases, mortgages are taken out between partners looking to live together. This approach to securing a mortgage has the benefit of being based off of two incomes.

This means that a larger mortgage can be lent than either of the two participants could borrow alone.

However, mortgages are not limited to just partners. A group of friends or family members can enter into a mortgage together.

A joint mortgage works much the same as a regular mortgage, but the two (or more) people are equally responsible for making the repayments.




This means that people are responsible for each other’s payments, and if one person falls into arrears or behind, then the others will have to make up the payments.

Lenders are mostly willing to lend to partners, or to come to an arrangement for a joint mortgage of more than two people, but it depends on each individual lender.

Shop around for the mortgage that suits you and your fellow mortgage borrowers, and make sure you know exactly what your responsibilities are, the options open to you during the mortgage term, and who will be responsible to pay should a party default.

Shopping around for mortgages

There are many types of mortgages and you need to make sure you get the one that is right for you.

Shop around, look at all types and take everything into account. Make sure you have read the small print and have anything you don’t understand explained to you.


The Different Types of Mortgages

Standard Variable Rate Mortgage

Standard variable rate mortgages have an interest rate that needs to be paid each month, but can vary from one month to the next. Usually, the interest rate changes proportional to another rate; the Bank of England’s base rate is very influential on variable interest rates, as is the base rate of each lender.

Fixed Rate Mortgage

A fixed rate mortgage is one in which the interest rate remains fixed throughout a previously agreed term. This usually involves a two year or five year deal, but ten year fixed rate mortgages are not unheard of. It depends on the mortgage deal on offer and which lender is offering the mortgage.

Tracker Mortgage

The interest rate on a tracker mortgage stays directly proportional to another base interest rate, plus a few percentage points.

Discount Mortgage

Discount mortgages are usually most beneficial to new customers and first time buyers. Set up similar to a standard variable rate mortgage, a discount mortgage simply gives a discount on the rate that has to be paid back.

Capped Rate Mortgage

A capped mortgage rate is similar to the standard variable rate, but comes with an interest rate cap.

Offset Mortgage

An offset mortgage is a good way to save on the amount of interest you pay on a mortgage over its term, and are a good choice for those with large amounts of savings.


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