Choosing the right mortgage can feel like a bit of a maze, especially if you’re new to it or haven’t explored your options in a while. But getting your head around the basics is easier than you might think.
At Whitegates, we believe informed buyers make confident decisions. Whether you’re buying your first home, moving somewhere new, or thinking about investing, understanding how different mortgages work can help you move forward with clarity and peace of mind.
In this guide, we break down the key types of mortgages available in the UK, explain how they differ, and offer tips on what to consider when choosing the one that’s right for you.
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Repayment vs interest-only mortgages
The first decision is how you’d like to repay your loan.
A repayment mortgage is the most common choice for residential buyers. With this option, your monthly payments cover both the loan amount (also called capital) and the interest. Over time, your debt reduces and if you keep up with your payments, you’ll own your home outright by the end of the mortgage term.
An interest-only mortgage works differently. You only pay the interest each month, and the full loan amount is due at the end. This means lower monthly payments, but you’ll need a clear plan to repay the capital, such as selling another property or using savings or investments. Interest-only mortgages are often used by landlords and investors, but some residential buyers also consider them with the right financial advice.
Fixed-rate vs variable-rate mortgages
The next choice is how your interest rate is handled and that will affect your monthly payments.
A fixed-rate mortgage keeps your interest rate the same for an agreed period, usually two, five or even ten years. This means your monthly payment stays the same, making it easier to budget. It’s a popular choice for buyers who want stability and peace of mind.
A variable-rate mortgage, on the other hand, means your interest rate can change. These come in a few forms:
- A tracker mortgage follows the Bank of England base rate, plus a set margin. If the base rate changes, your payments go up or down.
- A standard variable rate mortgage (SVR) is set by your lender and can be changed at any time. These are usually less competitive and used after your fixed or tracker deal ends.
- A discounted mortgage gives you a temporary discount on the lender’s SVR for a set period. The rate can still change, but the discount helps reduce costs at the start.
- A capped-rate mortgage is like a tracker or discount deal but with a maximum rate cap, so you know your payments won’t rise beyond a certain point.
Fixed rates offer predictability, while variable options offer flexibility and sometimes lower initial rates. It all depends on your priorities.
Related: Should I use a mortgage broker
Specialist mortgage options
Depending on your goals and situation, you might want to explore some of the more specialised mortgage products.
A buy-to-let mortgage is designed for people buying property to rent out. It’s usually interest-only, and lenders will assess your application based on the rental income the property can generate. You’ll generally need a larger deposit too.
If you’re planning to keep your current home and rent it out while buying another, a let-to-buy mortgage may be an option. It allows you to remortgage your existing property and use the equity to help fund your next purchase.
An offset mortgage links your mortgage to a savings account. Instead of earning interest on your savings, the balance is offset against your mortgage, which means you’re charged interest on a smaller amount. This can reduce your monthly repayments or help you pay off your mortgage sooner, depending on the setup.
A flexible mortgage allows for overpayments, underpayments, or even payment holidays. It’s helpful if your income varies or you want the ability to manage your repayments more actively.
A guarantor mortgage, also called a family-backed mortgage, involves a relative agreeing to cover your repayments if you’re unable to. It can be especially helpful for first-time buyers who don’t have a large deposit or strong credit history. It’s important that both parties understand the commitment before proceeding.
Mortgages for later life
If you’re over 55 and looking to release funds or borrow into retirement, there are tailored options to consider.
A lifetime mortgage is a form of equity release. You borrow against the value of your home, and the loan is usually repaid when the property is sold after you move into long-term care or pass away.
A home reversion scheme lets you sell part (or all) of your home to a provider in exchange for a lump sum or regular income, while continuing to live there rent-free.
A retirement mortgage is similarly to a standard repayment mortgage but aimed at older homeowners receiving pension income. It allows you to borrow into retirement and is typically based on affordability assessments.
These options are complex and should always be considered with the help of an adviser.
How mortgage eligibility works
Your mortgage eligibility determines which deals you can access and how much you can borrow. Lenders will look at several factors, including:
- Your income and employment status
- Your credit score and history
- Your monthly expenses and existing debts
- The size of your deposit
- The type of property you’re buying
Eligibility criteria vary between lenders, so it’s a good idea to check your options early.
You can check your mortgage eligibility by speaking to a mortgage broker or using a reputable online mortgage calculator. Many buyers also get a mortgage agreement in principle, which gives you an idea of what you could borrow and helps show sellers that you’re serious.
If your eligibility needs improving, there are a few things you can do. Saving for a larger deposit, paying down debts, and keeping your credit report in good shape can all help. Avoid applying for new credit before your mortgage application, and make sure you’re registered to vote, small details can make a big difference.
What to do next
Once you’ve explored your options and checked your eligibility, you’re in a strong position to begin your home search. At Whitegates, we work closely with trusted mortgage advisers and local experts who can help you every step of the way.
Whether you’re looking for a fixed-rate deal, buying to let, or just want to understand what’s possible, we’re here to help. Contact your local Whitegates branch today.
