Home Investing Everything You Need to Know About Mortgages

Everything You Need to Know About Mortgages


Mortgages are tricky things to get your head around. They all have their upsides and their downsides, their quirks, and interest rate changes relative to inflation rates. This can make them a bit of a nightmare and possibly even put you off getting one altogether. If owning your own home is new to you, you might not even have any idea what a mortgage is. Here is a short explanation of a mortgage and what types are available to give you a good overview of the basics of everything you need to know. It should also be mentioned that these different types can vary in name according to where in the world you happen to live.

First of all, what actually is a mortgage?

A mortgage is a loan that you take out from a lender (typically via some sort of broker) to be able to purchase your home. Over time, your repayments will be greater than the overall price of your house because of the added interest. However, over that same amount of time, you would realistically expect your property to increase in value at a greater rate.


What kinds of Mortgages are there?

There are a huge number of different mortgage products out there; these can include fixed-rate, tracker, and right to buy, as well mortgages for those with bad credit. All of these have equal but different risks that you will need to calculate and work out which is best for you. Here is a quick rundown of those listed above, in a little more detail:

  • Fixed-rate. Fixed-rate mortgages are mortgages in which your interest rate remains the same over a certain period (or even all) of the mortgage. The interest rate offered is likely to be slightly above whatever the variable rate currently is but will not increase should interest rates increase elsewhere. This can allow you to budget effectively if you are planning a family or have some renovation work to do on your new home and want to be sure of how much is going out each month.
  • Tracker mortgage. A tracker mortgage tracks the base interest rate set by central banks and will typically sit a couple of percent above that. This means that how much you pay will be more centrally governed than by just your lender. This again allows you some foresight over what your repayments are likely to be, as any interest rate rises are typically big news and discussed for months before they take place.
  • Right to buy. Right to buy is for those with homes that are owned by a local authority and are not typically available worldwide. The best illustration of this is in the UK, where tenants are able to purchase their rented homes for a discounted price from the local authority if they have lived there for an extended period of time. Right to buy mortgages can be made available for those with bad credit, too, with the correct right to buy mortgage broker

To wrap things up

The types of mortgage product might vary according to where you happen to live in the world, but the range means that there should be something for everyone, and by doing your own research and getting the right advice when it is needed, buying your home doesn’t have to be the potential nightmare you feared it could be.