Mortgages should be straightforward - you borrow money to buy a house and pay interest on the loan. In a hugely competitive market, building societies and banks are continually updating and extending their range of mortgages.
The most important points are how you pay back the capital you borrow and how you pay the interest on it.
You can either pay the capital a little at a time as you go (repayment mortgage) or pay it all off at the end (interest only or investment mortgages).
Your home may be repossessed if you do not keep up repayments on your mortgage.
The Financial Conduct Authority does not regulate buy to let or commercial mortgages.
For details of our fees for mortgage business please see our page How we are Paid
Please contact us for advice in choosing the best mortgage for your needs.
Paying Back the Capital
You can either pay a little at a time as you go (repayment mortgage) or pay it all off at the end (interest only).
Each monthly payment pays off a little of the underlying debt, as well as interest on the loan. At the end of the term the mortgage is cleared.
Interest Only Mortgages
With this type of mortgage, you pay off the interest on the loan but not the capital. Then at the end of the mortgage term it is your responsibility to repay the capital.
You can use an endowment policy to repay the loan at the end of the mortgage term (generally 20-25 years), usually alongside an interest only mortgage.
Paying the Interest
You have to pay interest on any debt, and mortgages are no different. They differ only in the range of options offered.
Variable, Fixed and Capped Rates
Variable: paying the going rate on your loan, goes up and down with changes in interest rates. Fixed rate: The interest rate is fixed for the period agreed. Capped rate: These are fixed, but if rates fall you pay the lower rate.