Mortgage advice and information guides on remortgaging and find out what mortgage is best for you. Mortgages can be confusing, since there seem to be so many different types of home loans available. But with a little homework, it is possible to gain a sound working knowledge of the subject and an understanding of the terminology.

Mortgage Advice: know your mortgage options

Even armed with this information it makes sense to talk to a professional mortgage adviser. With the number of mortgage choices available – well over 1,000 different deals (which are constantly changing), from over 100 lenders – an independent financial adviser (IFA) is well placed to help you select the type of mortgage that best suits you. Such an IFA should have access to most, if not all, of the latest mortgages (including many that aren’t available through high street lenders), and can provide invaluable assistance in highlighting potential pitfalls.

However, to help you make sense of the mortgage market, here’s a brief description of each type of mortgage, with handy summaries.

Right at the outset it is important to understand that there are two facets to a mortgage: how the loan is repaid; and how interest is charged on the debt. Get this clear in your mind, and logically everything else should fall into place.

Mortgage Options: Repayment or interest only mortgage?

There are two basic ways of paying off a mortgage: repayment and interest-only (backed by a separate investment):-

Mortgage Options: Repayment mortgage

With a repayment or capital and interest mortgage, you pay your lender a monthly sum, which is partly repayment of the outstanding debt and partly interest on the outstanding loan. Month by month the debt reduces.

Every time you move home or remortgage, you have to take out a new loan, and start your repayments from scratch.

However, providing you make all your monthly payments in full, the loan will be paid off at the end of the agreed term (which is usually 25 years, but could be longer or shorter).

Mortgage Options: Pluses

- Easy to understand.
- Loan guaranteed to be repaid if all payments made.

Mortgage Options: Minuses

- Very little capital is repaid in the early years of the loan.
- Monthly payments higher than for an interest-only mortgage.
- You’ll need to arrange separate life assurance.

Mortgage Options: Interest only mortgage

As the name suggests, you simply pay interest to the lender during the course of the loan. Your debt never reduces and at the end of the agreed mortgage term you owe your lender exactly the same sum as at the outset.

Monthly payments to your lender are lower than for a repayment-type mortgage, but you will have to clear the debt at the end of the term.

In order to pay off your mortgage you will normally have to make payments into a separate investment plan, which is designed to build up sufficient funds to repay the loan in full. You have a number of choices of investments, some of which are outlined in the following pages.

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Read More on your Mortgage Options

Mortgage Options: Mortage Must-Knows

Finding the Right Mortgage for You (Part I) – Repayment mortgage

Finding the Right Mortgage for You (Part II) – Endowment policies

Finding the Right Mortgage for You (Part III) – Repaying your mortgage

Finding the Right Mortgage for You (Part IV) – Interest Rates