​Mortgage Types

A standard variable rate mortgage (also known as an SVR) is a type of variable rate mortgage. The SVR is a lender’s ‘default’ rate – without any limited-term deals or discounts attached.
When your fixed, tracker or discount mortgage deals comes to an end, you will usually be transferred automatically onto your lender’s SVR.

A fixed-rate mortgage has an interest rate that stays the same for a set period. This could be anything from two to ten years and possibly longer. Your repayments are the same every month, and you don’t need to fear fluctuations in interest rates. At the end of the set period, you will revert to your lenders Standard Variable Rate (SVR).

A tracker mortgage is a type of variable rate mortgage. The interest rate tracks another rate such as The Bank of England base rate at a set margin (for example, 1%) above or below it. This means if the Bank Of England raises interest rates, then your mortgage interest rate will go up in line with it and thus your mortgage payments.

A discount mortgage is a type of variable-rate mortgage. The term ‘discount’ is used because the interest rate is set at a specific ‘discount’ below the lender’s standard variable rate (SVR) for a set period of time.
For example, if a lender has an SVR of 5% and the discount is 1%, the rate you’ll pay will be 4%. And if the SVR is raised to 6%, your discount rate will also rise – in this case to 5%.

A buy to let mortgage is a loan for purchasing or refinancing residential property which is let to tenants rather than lived in by the borrower. Classed as a business transaction, rates and fees are typically higher than those you would find with a standard residential mortgage.

You can find out more about buy to let mortgages here.

A 95% mortgage is a loan with a loan to value ratio (LTV) of 95% – meaning you pay 5% of the property’s value as a deposit and borrow the remaining cost. So, for example, if you wanted to buy a house worth £200,000 with a 95% mortgage, you’d borrow £190,000 and put in a deposit of £10,000 (5%) of your own money.
If you decide to take out a 95% mortgage, you’ll usually have to pay a higher rate of interest than you would if you had a bigger deposit. This is because the risk to the lender increases with the size of the loan they give you.

A guarantor mortgage passes some, or all of the liability, for the loan onto another person, typically a close family member. This arrangement allows you to get a home loan that is partially underwritten by someone else. As long as you maintain your repayments, the guarantor will not become liable. Should you be unable to meet the monthly repayments, then the lender will ask the guarantor to pay.
Mortgages of this nature are aimed at those whose income is not high enough to match a mortgage lender’s criteria for the required loan amount.

An offset mortgage is linked to one – or sometimes multiple – bank or savings accounts.
With a standard mortgage, your mortgage lender calculates the interest you owe based on the total amount you have borrowed. With an offset mortgage, the interest calculation is based on the total amount borrowed minus the sum that is held in the linked account(s).
For example, if you have an offset mortgage of £300,000 that is linked to a savings account containing £20,000, you would only pay interest on £280,000.

Many lenders offer mortgage deals to First Time Buyers to help them get on the property ladder. This can vary from lender to lender but can include cash back, family assisted mortgages and help through government-backed schemes.

Depending on your needs and circumstances, you might be interested in;

• Help to Buy
• ISA
• Help to Buy equity loans
• Right to Buy
• Shared Ownership
• Forces Help to Buy

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You can find out more about first time buyer mortgages here.