How to decide which mortgage is best for you

A mortgage is one of the biggest financial decisions you will ever make, committing to quite a few years of paying the loan back. It is important to obtain the most suitable loan for your requirements and one which is tailored to your circumstances.

A mortgage consists of the capital you have borrowed, plus the interest which is charged on the amount over the specified number of years. Some people choose to apply for interest only mortgages which only pay off the interest and leave the entire amount of capital outstanding at the end of the loan term. It is very difficult to obtain this type of mortgage unless you can prove you have the means to repay the capital at the end of the loan term. More commonly, a repayment mortgage is applied for, where you repay the interest and the capital throughout the term. You repay more interest and less of the capital during the first half of the loan term and during the second half, you will see the capital outstanding begin to decrease.

You also have a choice of whether to apply for a mortgage which has a Standard Variable Rate (SVR) or a fixed rate. The SVR means you will pay whatever the interest rate is at that moment in time, so if the interest rates increase you will pay more and vice versa. A fixed rate allows you to pay the same rate for a fixed period of time. This makes it easier for anyone who has limited income and needs to budget accordingly each month. Choosing a mortgage is complex, which is why CeMAP courses are taken by all mortgage advisers, so they have the relevant knowledge to assist you.



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