Are you considering a big move? Your first home, or perhaps just want to remortgage?
Our mortgage calculator will show you how much you’ll pay each month, and what the total cost of the mortgage will be over its lifetime.
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Saving for your first home
If you’re under 40 year old, and saving for your first home consider a Lifetime ISA (or LISA). A LISA is an individual savings account that allows you to save up to £4,000 a year either towards your retirement or buying your first home. What makes it special, is that the Government add a free 25% on top of what you’ve saved that year.
There are a number of caveats and restrictions, so be sure see our complete guide to the new Lifetime ISA
If you’re over 40 year old, or simply don’t want a LISA, then there’s still some great savings offers available for you too, with the top easy access savings accounts paying over 5% interest AER. See our guide to the best savings accounts.
Mortgage Types Overview
Fixed-rate Mortgage
A fixed-rate mortgage ensures that your interest rate remains the same for a set period, typically 2, 3, 5, or even 10 years. This provides stability in your monthly payments, making budgeting easier.
Advantages:
- Predictable payments
- Protection from interest rate rises
Disadvantages:
- Potentially higher initial rates compared to variable-rate mortgages
- Early repayment charges if you exit the deal early
Variable-rate Mortgage
The interest rate on a variable-rate mortgage can change, which means your monthly payments can go up or down. There are different types of variable-rate mortgages:
- Standard Variable Rate (SVR): The default interest rate your lender will charge after your initial deal ends. This rate can change at the lender’s discretion.
- Tracker Mortgages: These track the Bank of England base rate plus a set percentage.
- Discount Mortgages: These offer a discount on the lender’s SVR for a set period.
As the interest rate for these mortgages can change, it is difficult to calculate exactly what your repayments will be each month.
Advantages:
- Potentially lower initial rates
- No early repayment charges (typically)
Disadvantages:
- Payments can increase
- Less predictable than fixed rates
Interest-only Mortgage
Interest-only mortgages have fallen out of favour over the last 15 years. Typically with an interest-only mortgage, your monthly payments only cover the interest on the loan, not the capital. At the end of the term, you must repay the original loan amount. As such these mortgages are more popular with landlords, but you in some cases you can change your mortgage to a ‘buy to let.‘
Advantages:
- Lower monthly payments
- Can be useful for buy-to-let investments
Disadvantages:
- You need a repayment plan for the capital
- Risk of not being able to repay the loan at the end
Frequently Asked Questions (FAQ)
Q: What is LTV?
Loan-to-Value (LTV) is the ratio of the loan amount to the property’s value, expressed as a percentage. For example, you want buy a £200,000, and you have a £50,000 deposit. You need to borrow £150,000 so the LTV would be 75%. i.e. you are borrowing 75% of the total value of the property.
Higher LTVs typically mean higher interest rates.
Q: What is an Agreement in Principle?
An Agreement in Principle (AIP) is a statement from a lender indicating how much they might lend you based on your income and credit score.
Q: Do I need a mortgage broker?
A mortgage broker can help you find the best deals and navigate the application process, but it’s possible to apply directly to lenders as well.