Types of Mortgages Available in the UK

What Types of Mortgages are Available in the UK

Buying a house is a great milestone in anyone’s life, but there’s a lot that needs to be done before you can actually call yourself the owner of the house. Acquiring a mortgage is one of those things. In the UK, there are many different kinds of mortgages you can choose from, and we’d like to share all of them with you. You should be able to decide which mortgage best suits your situation.

Repayment Mortgage

This is the most common sort of mortgage. The principle of this mortgage option is quite simple: you will receive a loan from your lender of choice, and pay it back over a period of time. Usually, this would be anywhere between 20-30 years, but some lenders allow you to pay it back over a period of 40 years.

You pay a monthly amount which will repay part of the capital you have borrowed, including the interest attached to the loan. After the designated period of time has elapsed, your loan should be paid in full. The house is now paid off and is officially yours. During a repayment mortgage, you can choose to remortgage your home if you find another lender who fits your needs better.

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Interest-only Mortgage

Choosing an interest-only mortgage means you’ll be required to pay the full cost of your property at the end of the interest-only mortgage. Each month, you’ll only be required to pay the interest. When the term ends, you’ll need to pay 100% of the money you owe or you’ll be forced to sell your property.

What this means, is that you’ll be saving a lot of money monthly as the interest is usually very low, but you need to be sure that you have the money you need when the term ends. A lot of buyers choosing this option will use high interest fixed rate savings accounts to make sure they have the money needed to cover the bill when the time comes.

Fixed Rate Mortgage

Opting for a fixed rate mortgage can be a safety net or a choking hazard. As the name suggests, the rate is fixed each month meaning you won’t have to deal with variable rates. The plus side to this, is that you know where you stand for the duration of the fixed period, but the negative side to this is that you won’t be able to benefit from mortgage rates dropping as your price will always be the same.

Usually, this kind of mortgage can run anywhere between 2 and 10 years. Once you’ve fulfilled your term, you’ll revert back to the lender’s standard variable rate. This is when you can remortgage your home or apply for another fixed rate term.

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Variable Rate Mortgage

A variable rate mortgage is a basic mortgage which can fluctuate. The interest isn’t fixed, meaning that you can either pay more in a year, less, or the same amount. Other mortgage options are often based around this variable rate. Variable mortgage rates are often based on the base rate of the Bank of England, but the lender can apply his or her own criteria too.


If you want a mortgage which is centred around the Bank of England’s base rate, tracker mortgages are the way to go. The interest rate can go up or down depending on what the Bank of England does. Keep in mind though, that most lenders won’t allow a loan to drop below a certain rate, regardless of what the Bank of England does.

Capped Rate Mortgage

If you’re worried about paying too much interest at a high rate on your mortgage, then capped rates might be the way to go. This way, you won’t be able to rise above a stipulated amount, but you can still benefit if they go down. Basically, you’ll be protected against any unusually high interest rates.

First-time Buyer Mortgage

Some lenders choose to give first-time buyers a special deal. Most of the time, these deals will be tied in with government schemes like Help to Buy. That means these deals won’t always be available, and not every lender has to offer these deals.

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Discount Rate Mortgage

A discount rate sounds great, doesn’t it? Not always. This kind of mortgage is great when the variable rate is stable, but when the rates are up and down like a rollercoaster, you should think about choosing a different kind of mortgage. Usually, a discount rate mortgage is restricted to 2-5 years.

Offset Mortgage

Offset mortgages are the best choice for people who have a lot of savings to put into the house. With an offset mortgage, you’ll only be paying interest on the difference between your mortgage and your savings. This is calculated per month. You can still access your savings, but your offset amount will decrease and your mortgage term increase.

People who fall in the higher tax band greatly benefit from this loan, as you won’t be paying any tax over savings that are being used to offset your mortgage.

Flexible Mortgage

If you don’t have a steady income, for reasons like being self-employed or likewise, you can take out a flexible mortgage. This allows you to pay more or less each month, and can even allow you to miss payments altogether if financial circumstances become a little tricky. Unfortunately, flexible mortgages often carry a higher rate of interest.

Buy-to-let Mortgage

If you’re looking to rent your house to others, you can consider a buy-to-let mortgage. The calculations of a buy-to-let mortgage all depend on how much rent the lender thinks the property can achieve, so each situation and application is treated differently.

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You can see that choosing the right mortgage and getting approved can be a bit of an obstacle course. Searching for the best mortgage deal to suit your needs can be complex and time consuming. When you choose Prime, you’re choosing a company that works hard on your behalf to get you great options – that goes for mortgages and for life insurance. At Prime we have an exceptional FCA approved team of life insurance & mortgage specialists working for you. We provide excellent one to one services tailor made to your own individual needs and we make your time with us hassle free – we do all the heavy lifting.

Prime is proud of the reputation it has built over many years, and this is largely reflected through the positive reviews we receive on a regular basis from customers in Wigan, Greater Manchester and across UK, in person, on Trust Pilot and Google online.

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Perhaps you have questions you would like answers to? Like..Which mortgage is best for me? Which mortgage is best for a first time buyer? Can you find me an affordable mortgage? We have been turned down for a mortgage recently, can you still help us? I am looking to remortgage can you help? Our dedicated team of experts can answer any and all of your questions.

Getting a mortage agreed is a big step forward in life, and so is having a Life Insurance policy. You can ensure your family is taken care if there is sudden terminal illness or your life should end. You can find out more about us and what we do here and if you need help with anything else, Prime can help. Click here to Get a Life Insurance Quote or use our quick contact form to get in touch. Our friendly dedicated team is available by telephone 01942 665 436 during office hours.