The Two Basic Types Of Uk Mortgage

The Two Basic Types Of Uk Mortgage 1

The Two Basic Types Of UK Mortgage
In the​ United Kingdom there are two main mortgages that people choose between when purchasing their home .​
Other options are available but for the​ large majority of​ people,​ it​ is​ one of​ either the​ fixed-rate mortgage or​ the​ adjustable-rate mortgage which is​ best suited to​ their requirements.
The fixed-rate mortgage is​ the​ most simple of​ mortgages and the​ one which most people see as​ the​ traditional way to​ purchase your home .​
This involves the​ mortgage provider lending you​ the​ money you​ need to​ buy your home and,​ using their interest rate,​ calculating how much interest the​ loan will accrue over the​ period for which the​ mortgage has been borrowed .​
This is​ usually either 15 or​ 30 years .​
The sum of​ the​ interest is​ added on​ to​ the​ amount being borrowed and the​ monthly repayments are simply the​ result of​ this total divided by the​ number of​ months over which the​ mortgage will be repaid .​
This ensures that the​ monthly amount stays the​ same for the​ life of​ the​ mortgage.
The adjustable-rate mortgage is​ slightly different .​
The interest to​ be paid on​ the​ amount of​ the​ loan that you​ borrow changes dependent on​ interest rate changes in​ the​ country .​
The first year of​ the​ mortgage is​ usually offered with a​ teaser rate of​ interest .​
This is​ generally slightly lower than the​ market interest rate .​
After this point the​ interest reverts to​ the​ standard level for that time .​
However,​ you​ do have a​ cap at​ which point the​ interest will not get any higher .​
This is​ usually five points higher than your teaser interest rate so if​ your teaser was 4% your cap would be 9% .​
The important thing to​ consider if​ you​ are thinking about opting for the​ adjustable-rate mortgage is​ that you​ may have to​ pay the​ capped level of​ interest for the​ life of​ the​ loan .​
That is​ the​ worst case scenario but it​ is​ certainly worth calculating whether you​ could afford this level of​ monthly repayment just in​ case you​ may have to​ in​ the​ future.

The Two Basic Types Of Uk Mortgage

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