It can be an intimidating process searching and applying for your very first mortgage. There are various types offered by all sorts of lenders, from banks and building societies to independent financial institutions, with different terms and conditions attached.
Thankfully you don’t need to be a financial expert to work out what factors make a mortgage from such providers as Saffron Building Society, best for you. Taking out a mortgage will probably be the largest amount of money you borrow in your lifetime so you’ll want to get it right first time by picking one with elements best for your situation.
Fixed rate mortgages are ideal for the worried investor. They are by far the safest option as the interest rate you pay on a mortgage will stay the same throughout an agreed period, whether it is five, ten, fifteen or more years. It is best for helping you budget efficiently as there will be no change to this amount.
There is the disadvantage that you will miss out if interest rates fall and there can be charges in place if you wish to change to an adjustable rate mortgage before the deal is up. It is best when interest rates are increasing and if you expect to stay in the same home for a few years.
A more complex mortgage is one with an adjustable or variable rate. These can be put in place for an agreed length of time but the interest rate will change throughout it. Whether that is every month, six months or year will depend on the agreed contract.
This is good for those with some backup cash who are able to afford more if the rate changes and it can be lowered too. When mortgage rates are falling they are a good option as the rate will be lower, yet as interest rates rise so too will your adjustable rate.
Hybrid, Offset and Tracker Mortgages
A hybrid mortgage is a mixture of the two, usually charging a fixed rate for a certain length of time before switching to an adjustable rate. If you’re intending to sell or refinance in a couple of years this can be an advisable option.
An offset mortgage links savings and current accounts to your mortgage so you only pay interest on the difference. While tracker mortgages change in line with the Bank of England’s interest rate, falling or increasing as it does, providing a riskier choice. Be aware of the different interest types when applying for your first mortgage.