Choosing the right mortgage for you
A mortgage can last for a long time, so it’s important that you choose one that is right for you. You'll need to decide such things as the type of loan, how long you want it for and what type of product would be suitable for you. The following section sets out the different options available to you.
- Fixed vs. tracker rate products
- Repayment vs. interest only
- Fee vs. no fee
- Mortgage term
- Payment date
Fixed vs. tracker rate products
The rate of interest you pay every month on your mortgage will depend on the mortgage product you have.
Fixed rate
This fixes your interest rate for a specified period of time and won’t change until an agreed date.
Pros - You'll enjoy certainty and peace of mind. You know your interest rate won't change during the fixed rate period, meaning that even if interest rates increase, during that period your rate won’t be affected.
Cons - Rates are usually higher than on tracker products. And if interest rates fall, you won’t see your payments drop with them during the fixed rate period. If you wanted to repay your mortgage or switch to another mortgage deal during the fixed rate period you'll probably have to pay an Early Repayment Charge.
Tracker rate
Typically this moves in line with the Bank of England bank rate. So it will be the same as, or a percentage above or below the bank rate, until an agreed date. So the tracker rate you pay can go up or down.
Pros - Whenever the Bank of England bank rate falls, you will benefit from the same reduction in your rate unless this would take the rate below a minimum rate that you may have on your mortgage product. In which case, your rate would stay the same until the Bank of England bank rate increases again. Please refer to your mortgage offer for details of any minimum rate that may apply to your product.
Cons - If the Bank of England bank rate rises, your payments go up with it. In some cases you may have to pay an Early Repayment Charge if you want to repay your mortgage or switch to another mortgage deal during the tracker rate period.
As with most loans, with a mortgage you have to repay the capital (the amount you're borrowing) and the interest on the outstanding capital until it’s repaid. We currently have three repayment options available - repayment, interest only, and part repayment & part interest only. Each of our rates will indicate which repayment types they’re available for.
For further information on the different repayment methods, please take a look at our Repaying your mortgage guide.
If you want any element of your mortgage on an interest only basis, we’ll ask you to provide information about the repayment plan(s) you intend to use to repay the capital.
Most mortgages come with a mortgage product fee attached. As a rule of thumb, you get a lower initial mortgage rate in return for paying a higher fee. Or, alternatively, a lower fee (and in some circumstances, no fee) for a higher initial mortgage rate. If you do have to pay a product fee, it could be added to your new mortgage. You can then either:
- pay the fee immediately
- leave it on your mortgage to spread the cost over the life of your mortgage, bear in mind that interest will be charged on it as part of your main mortgage.
The standard length of time (the ‘term’) to repay most mortgages is 25 years.
You might consider a shorter term to help pay back your mortgage sooner. However, some lenders, including Halifax, allow a maximum term of 40 years.
This could help with budgeting early on, keeping your payments low initially. You could then reduce the term at any point in the future provided you could meet the higher level of payments.
If you choose to repay your mortgage over a longer period, you’ll be charged more interest overall. So your total repayment will be higher than if you were to take the mortgage over a shorter term.
Take a look at our mortgage calculator to see how different terms can affect your repayments.
You can select which date during the month you make your mortgage payment, allowing you to choose a date which fits your lifestyle. The payment date you select may affect the amount of initial interest you pay on your first mortgage payment.
Find out about applying and what happens next
Other useful guides:
Or take a look at our mortgage deals:
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
