What types of home loans can I get in the UK?
In the UK, there are several types of home loans (mortgages) available to suit different needs and circumstances.
1. Fixed-Rate Mortgages
The interest rate is fixed for a set period, typically 2, 3, 5, or 10 years. Monthly Payments: Remain the same throughout the fixed period, providing certainty in budgeting.
2. Variable-Rate Mortgages
The rate can change over time, often in line with the Bank of England’s base rate or the lender's standard variable rate (SVR). Can go up or down depending on interest rate changes.
The lender's default rate, which can change at their discretion. The interest rate tracks the Bank of England’s base rate, usually with a set margin above it.
3. Interest-Only Mortgages
You only pay the interest on the loan each month, not the capital.The capital is repaid in a lump sum at the end of the mortgage term, often through savings, investments, or selling the property.
Lower monthly payments compared to repayment mortgages.
Flexibility if you have a solid plan to pay off the capital at the end of the term.
4. Repayment Mortgages
Each monthly payment goes towards both the interest and the capital, reducing the loan balance over time. By the end of the term, the mortgage is fully repaid.
Guaranteed to pay off the mortgage by the end of the term, as long as payments are made.
Higher monthly payments compared to interest-only mortgages. Less flexibility compared to interest-only options.
5. Offset Mortgages
Your savings account is linked to your mortgage. The savings balance is offset against your mortgage balance, reducing the interest you pay. You can either reduce your monthly payments or shorten your mortgage term.
6. Flexible Mortgages
Allows for overpayments, underpayments, and payment holidays. Some flexible mortgages let you borrow back any overpayments or take a payment holiday if needed.
7. Buy-to-Let Mortgages
Specifically for purchasing property that will be rented out to tenants. Typically higher interest rates and larger deposits required compared to residential mortgages.
8. Help to Buy Mortgages
Available to first-time buyers and existing homeowners purchasing a new build.The government lends you up to 20% (40% in London) of the property price, reducing the mortgage amount needed.
9. Shared Ownership Mortgages
You buy a share (usually between 25% and 75%) of a property and pay rent on the remaining share. You can buy additional shares over time, potentially up to