The description of terms below is intended to describe the differences between the various "flavours" of mortgage loan available to UK property buyers with a view to helping them decide which would be the best one for them and their financial situation.



The Varieties of UK Mortgage

Interest Only - Interest only mortgages allow you to borrow money and repay the interest alone for the duration of the mortgage loan. At the end of the term the entire amount of the sum borrowed has to be paid up.

Repayment Mortgages - The monthly mortgage payments with this type of mortgage include both capital and interest payments. At the end of the loan term the loan is considered repaid.

Endowment Mortgages - An endowment mortgage is effectively an mixture of an interest only mortgage with an endowment plan that is calculated to repay the capital amount borrowed when the mortgage term completes.

Mortgage Pensions - Like an endowment mortgage, mortgage pensions are also a mix of an interest only loan which is paid up upon retirement when the borrower's pension plan can cover the capital amount.

Investment Mortgages - An interest only arrangement that uses some type of investment to pay off the mortgage amount at the expiry of the loan term. Such investments could be an ISA (Individual Savings Accounts), PEPs (Personal Equity Plan) or any other form of investment.

Adverse Credit - This is a specialized type of mortgage targetted at people who have a poor credit history.

Offset - Offset mortgages will allow you to lower your interest payments by offsetting a credit balance.

Foreign Currency - Your mortgage amount is changed into a foreign currency in order to lower interest repayments by taking advantage of exchange rate variances.

Flexible Mortgages - Gives you the flexibility to make over payments without incurring additional charges.

Buy-to-Let Mortgages - Mortgages designed to enable you to buy a property that you intend to let to tenants.

Let-to-Buy - Mortgages designed to enable you to let your current property so that you may buy another.

Non-Status Mortgages - A type of mortgage where your income does not play a part in calculating how much can be borrowed.

Standard Interest Rates Applied to Mortgage Loans

Fixed Rates - These are rates that remain fixed for an agreed period of time. This will most likely be two, three, five or ten years. Longer term fixed rates will often be more costly and also less popular than lesser fixed periods.

Standard Variable Rate - The Standard Variable Rate (SVR) is a default interest rate that is offered to people seeking a mortgage.

Discount Rates - A discount rate occurs when there has been a significant period of elapsed time in which the Standard Variable Rate has been low. This time period is usually calculated over a 1 to 5 year period.

Variable Rates - Variable rates are the antonym of fixed rates. Rates in this type of interest scheme are decided according to a given lender's discretion.

Capped Rates - Capped Rates have several similarities to fixed rates in the way that interest will not fluctuate over a certain ceiling. But below this ceiling the rate can change. Some capped rate plans also include terms called collar rates which will also fix a lower end rate that will not change.

Tracker Rates - Tracker Rates are connected to the Bank of England Base Rate.