Compare mortgages

With fixed-rate mortgages your interest rate won't change for a set period of time. There are various deal lengths available and you fix the rate for that amount of time, usually two, five or 10 years.

Knowing that your mortgage rate won’t increase within a specific time frame makes budgeting for your monthly repayments much easier. But you won't benefit if interest rates decrease whilst you're on a fixed-rate deal.

There are three different types of variable-rate mortgages:

• Standard variable rate (SVR)

• Discount

• Tracker

All variable interest rates are subject to change at any time. The introductory period of variable rate deals can be cheaper than a fixed-rate deal initially, but become more expensive if rates rise (or cheaper if rates fall).

Standard variable rate (SVR)

This is the mortgage lender’s default rate and is usually higher than any of their other deals. You will normally end up on this rate at the end of any other type of deal, unless you remortgage to another deal.

Discount mortgages

With discount mortgages, you get a discount on the lender’s SVR for a specified period of time. Your rate will go up or down along with the SVR, but there's no guarantee that this will happen or by how much.

Tracker mortgages

With tracker mortgages, during the initial deal period, your mortgage rate is a certain level above an external financial indicator, usually the Bank of England base rate. Your rate will follow its movements, matching how much it rises and falls by.

With offset mortgages, your savings are offset against your mortgage loan so that you pay less interest. For example, if you have savings of £50,000 and a mortgage of £200,000, you would only pay interest on £150,000. Your savings would not accumulate any interest though. You can get fixed or variable offset mortgages.

With interest-only mortgages, you'll only pay the interest on the loan and will be required to pay back what you borrowed in full at the end of the term. While your monthly mortgage repayments may be lower, you'll likely repay more interest overall as you're paying interest on the full amount of the loan for the entire mortgage term.

A mortgage is a loan from a bank, building society or other lender that you use to buy property. You normally repay the mortgage plus interest over a set period of time (the mortgage term), normally around 25-30 years.

This type of loan is secured on the property you’re buying, meaning that if you default on payments (fail to repay the loan), the lender could potentially repossess your home (take it back). This is usually a last resort, but it's important to understand that you won't own the property outright until the entire loan has been repaid.

You can use a property bought with a mortgage as soon as the purchase has been completed. Being able to continue doing so depends on you keeping up with the repayments each month.

The typical length of a mortgage in the UK is around 25-30 years, but the term can be shorter or longer, depending on your preference, income and age.

A longer term mortgage will allow you to keep your monthly costs lower, as it will spread out the repayments over a longer duration. But this also means that it takes you longer to repay the mortgage, and you’ll pay more interest overall as a result.

The LTV is the ratio between the value of your property and the amount you're borrowing. For example, if you take out £112,500 mortgage on a £150,000 property, the loan would be 75% LTV. You would therefore need a deposit of 25% (or £37,500).

All mortgages have a maximum LTV that it's possible to borrow, and typically, the higher the LTV (the more you borrow compared to the cost of the property), the higher interest rate you’ll pay.

First-time buyers tend to need to borrow a higher percentage of the property’s value than existing homeowners. This is because if you already have a home, you typically build up equity in the property as you repay the loan and when house prices rise. Equity can be used as a deposit when you find a new remortgage or move home.

APRC stands for Annual Percentage Rate of Charge and is a way of comparing different mortgages. It takes the overall rate charged over the lifetime of the mortgage, including any fees, and gives you a baseline mortgage rate comparison.

Mortgages generally offer a lower interest rate for the first two to 10 years then revert to the lender’s standard variable rate (SVR). Every lender has their own SVR and this is typically (but not always) the most expensive rate available.

The APRC uses both of these interest rates to show the real cost over the whole term of the mortgage. This helps you to find out whether the mortgage deal with the lowest initial rate is really the cheapest overall.

As this assumes you’ll keep the same mortgage for the whole term, it’s not always a useful way to compare deals, however. Looking at the total cost over the deal period can be a better way to find the cheapest option, if you're planning to switch mortgages when each deal period ends.

Most residential mortgages are only offered on a repayment basis, so if you're purchasing a home to live in, then you will most likely need to get a repayment mortgage.

This is because interest-only mortgages are much riskier, as you still owe the full loan amount at the end of the term. You need a repayment plan in place and if this doesn't work out, you'll need to sell the property at the end of the term.

However, if you're purchasing a buy-to-let property, interest-only mortgages are commonly available. Most landlords use interest-only mortgages, as it means the monthly mortgage repayments are lower, allowing them increased profit from the rent.

This can be used for property maintenance or saved towards repaying the full loan at the end of the mortgage term. Plus, landlords are usually happier to sell a investment property than residents are to sell their home at the end of the term, if necessary.

A repayment mortgage costs more each month than an interest-only mortgage. However, you will repay more interest overall with an interest-only mortgage, as you’re paying interest on the full capital amount for the entire mortgage term. 

For example, if you had a mortgage of £200,000 at 5% over 20 years, the total interest would be around £116,876 if you took out the mortgage on a repayment basis. If you took it out on an interest-only basis, you would end up paying £200,146 in interest and would still owe £200,000 capital at the end.

When applying for a mortgage, it's important to get a competitive rate, as this will determine how much you pay each month.

An independent mortgage broker carry out mortgage rates comparison across the whole market very quickly, and help find the deal that's most suited to your individual circumstances.

Important questions to consider when choosing a mortgage are:

• How much will my monthly mortgage payments be? 

• What arrangement fees will I need to pay?

• If I choose a variable-rate mortgage, what happens when interest rates rise?

Always factor in the fees as well as the interest rate when you're deciding which is the most affordable option overall. The easiest way to do this is to look at the total cost over the deal period. Some fees can be paid upfront or added to your mortgage. If you do add fees, you’ll pay interest on them along with the rest of your mortgage.

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