The Different Types of Mortgages Explained in Hull

Whether you’re a first time buyer in Hull starting your journey to step onto the property ladder or in the midst of moving home in Hull, your research will show you a wide variety of mortgage options available to you.

Amidst this array, some options emerge as more prevalent than others. To guide you through this landscape, we’ve curated a helpful list of the mortgage options we frequently encounter. Each section is thoughtfully accompanied by an informative mortgage video from our YouTube channel, MoneymanTV.

For more insightful resources, you can explore additional helpful mortgage guides or directly access our “Mortgages Explained” playlist here.

What is a fixed rate mortgage?

Opting for a fixed rate mortgage provides the assurance that your monthly mortgage payments will remain consistent for a predetermined period. By fixing your interest rate at a specified level, you gain stability in your mortgage payments.

When determining the duration of this fixed period, you have the flexibility to choose a timeframe that suits you, typically ranging from 2 to 5 years. While longer terms are possible, many borrowers lean towards shorter periods to maintain the flexibility to adapt to potential interest rate changes.

In a world of fluctuating inflation and economic shifts, a fixed rate mortgage offers peace of mind. Regardless of external factors, you can rest assured that your mortgage commitment remains steady, allowing you to confidently manage your financial affairs.

What is a tracker mortgage?

Kicking off your tracker mortgage journey means that your mortgage’s interest rate aligns with the Bank of England’s base rate – a key factor influencing economic dynamics such as inflation. In simpler terms, your chosen mortgage lender won’t determine your interest rate, nor will you fix it yourself.

Instead, your interest rate will track a certain percentage above the Bank of England base rate. As an illustration, if the base rate is 5% and your tracking rate is 1% above it, your interest rate would total 6%.

What is a repayment mortgage?

Among the most commonly encountered mortgage types, a repayment mortgage structure involves the simultaneous repayment of both the borrowed capital and accrued interest.

Maintaining consistent payments throughout the mortgage term ensures that by the end of your journey, your mortgage balance is entirely settled, and your property ownership is solidified.

This approach offers a reassuring path to property ownership, with the assurance that your commitment will culminate in full ownership.

In the initial stages, payments largely comprise interest, causing the balance to reduce gradually. As your term progresses, the balance reduces at a faster pace, especially in the latter years.

What is an interest only mortgage?

Whilst buy to let mortgages often adopt an interest-only format, this structure is less common for residential customers. A buy to let mortgage in Hull typically means that you’ll have an investment mechanism, the property itself, to repay the capital at the term’s end.

With an interest-only structure, you solely cover the interest during the term. Residential mortgages may offer this structure under specific circumstances, such as downsizing at a later age or having alternative investments to cover the capital repayment.

Lenders have strict criteria for providing interest-only products, often requiring substantial deposits to minimise risks.

What is an offset mortgage?

If you’re considering an offset mortgage, your lender establishes a linked savings account alongside your mortgage account. This setup offsets the interest on your mortgage, resulting in potential savings.

For instance, if you hold a £100,000 mortgage balance and deposit £20,000 into your savings account, you’ll repay interest on only £80,000 of your mortgage balance.

While you maintain the flexibility to deposit and withdraw funds, the effectiveness of this arrangement hinges on substantial savings contributions. Offset mortgages prove particularly advantageous for higher rate taxpayers aiming to optimise their financial position.

Last Edited 30/08/2023