UK Mortgage Refinance

 

If you are considering remortgaging it is worth being aware of the different types of mortgage on offer. For many there first mortgage is a standard variable capital and interest repayment market. However there are now an increasing number of mortgage types. Depending on your financial situation it may be worth switching to a different kind of mortgage. Not only will you benefit from lower mortgage payments but also you may be able to find a better type of mortgage.

 

Different Types of Mortgages to consider

  1. Interest only. This is a mortgage where you only pay interest on the mortgage debt. This means at the end of the mortgage term you will not have paid any capital off. Therefore a separate saving scheme is needed. These are often more expensive in the long term. It can also be riskier to rely on another type of investment. However it may be worth considering if.
    1. In the short term your financial situation is poor. Maybe you are studying for a couple of years and you need to reduce your outpayings as much as possible.
    2. You have a good, reliable investment scheme to pay off the debt at the end of the term.
  2. Offset mortgage – Similar to a current account mortgage. This mortgage can give significant monetary benefits if you have a large current account deficit. An offset mortgage works by automatically using deposits in a current account to pay off your mortgage capital. Therefore it means your interest payments can be reduced, because the amount of mortgage loan is reduced. Furthermore you will not pay tax on your current account interest. If you often have a large current balance this can be a very beneficial type of mortgage. It is also easier and more convenient to manage just one account.
  3. 100% mortgage. This means that you borrow the full amount of the value of the house. This may be useful if you wish to remortgage for equity withdrawal. Equity withdrawal means you take out money against the value of the house. This could be used for loan consolidation. I.e. paying off debts which incur a higher rate of interest than your mortgage. Such mortgages are usually more expensive and you will probably be required to take out mortgage indemnity protection. MIG. A 95% mortgage would probably be a much better deal. However if your property would benefit from a lot of redevelopment you may benefit from a 125% mortgage which gives you enough money to refurbish house and then sell it for a much higher value.
  4. Flexible Mortgages - Offers opportunity to vary the amounts paid back, sometimes less than average sometimes more. Good for those whose income is not stable.