The Different Types of Mortgages Explained in Sunderland

When you begin the process of looking for a mortgage in Sunderland, you will soon realise that there are a wide variety of different options available. By enquiring for expert mortgage advice in Sunderland, we’ll help you to determine which one is right for you.

Below you will see a list of the most popular types of mortgages available on the market. If you have any questions regarding the mortgage options below, do not hesitate to contact our fantastic team of mortgage advisors in Sunderland.

What is a fixed rate mortgage?

A fixed-rate mortgage means that your mortgage payments are going to remain consistent for a particular duration. You are able to choose how long you fix your payments for, with this typically being around 2-5 years.

This means that no matter what happens with inflation, interest rates, or the economy, you know that your mortgage payment, which will most likely be your biggest outgoing, will not change.

What is a tracker mortgage?

When you have a tracker mortgage, this means that your interest rate will follow alongside the Bank of England’s base rate. In this situation, the mortgage lender that you are with will not be setting the rate themselves.

You will be paying at a percentage above the Bank of England base rate. For example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.

What is a Repayment Mortgage?

Home buyers who are looking to take out a repayment mortgage will have a combined amount of capital and interest to pay each month.

If you are able to maintain those monthly mortgage payments, he mortgage balance is guaranteed to get paid off at the end, with you owning the property outright.

A repayment mortgage is generally considered to be the most risk-free way to pay your capital back to your mortgage lender. Early on it will mainly be the interest that you are paying and your balance will reduce very slowly, especially for homeowners with say a 25+ year term.

This will change over time and in the last ten years or so of your mortgage, your balance will be reducing at a much quicker rate, as you will be paying back more capital than interest.

What is an interest only mortgage?

While you will find that a lot of buy to let mortgages in Sunderland get set up on an interest-only basis, it is much difficult for a residential home buyer to take out an interest only mortgage on their home.

Typically, you will find that it is much less likely for a mortgage lender to offer interest only residential products to customers, though there are a selection of circumstances where this type of mortgage may still be applicable.

These tend to include downsizing when you are older or have other investments that you will use to pay the capital back. Mortgage lenders can be quite strict when it comes to offering these products now, and the loan to values are a lot lower than they used to be.

What is an offset mortgage?

With an offset mortgage, your mortgage lender will go ahead and set you up a savings account that will run alongside your mortgage account, to help you offset the balance and reduce the interest paid overall.

For example, let us say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you only pay interest on the difference, which in this case would be £80,000.

It is for this reason that an offset mortgage could be a truly efficient way of managing your money, especially if you are a higher rate taxpayer.

Book a Free Mortgage Appointment with a Mortgage Broker in Sunderland

If you like the sound of any of the mortgage options that have been mentioned above, have any other questions relating the mortgage process or would like to get the ball rolling on your mortgage journey, please do get in touch.

In booking your free mortgage appointment online, you’ll benefit from speaking to a trusted and qualified mortgage advisor in Sunderland, who will look to guide you through the process as best they can, finding the most suitable mortgage product to fit your circumstances.

Date Last Edited - 19/08/2022