We understand that buying a home is a big step and one of the biggest financial decisions you’ll make in your life, and can seem a daunting and complicated process. Through this online guide, we hope we can help you find your way through the maze.

There are lots of different home loans offered by lenders to suit many different purposes. In this guide, Director of Andrews Mortgage Services, Chris Chapman, looks at the most popular options to help you choose the one that suits you best.

The initial lump sum that you put into buying your home (not including the money you’re borrowing) is known as the ‘deposit’.

The bigger your deposit, the more likely you are to get a better interest rate on your home loan. That’s because your mortgage will then form a smaller percentage of the price of your new home, which generally attracts a lower interest rate.

Standard Variable Rate

The Standard Variable Rate is a standard interest rate that a lender will set and which can then go up or down in line with market rates (such as the Bank of England’s base rate).

“The advantage of the standard variable rate is that you have more flexibility and can usually repay your mortgage without any early repayment charges. The disadvantages, however, are that your monthly payments can go up and down which can make budgeting difficult. What’s more, standard variable rate mortgages are not usually the lowest interest rates that lenders offer.”

Fixed Rate

With a Fixed Rate mortgage, your monthly payment won’t change for a set period. At the end of your fixed rate, your lender will usually change your interest rate to their Standard Variable Rate (SVR). It’s a good idea to review your mortgage at this stage because the lender’s SVR may well not be the best deal around at that time.

“With a fixed rate, you’ll know the exact amount that you’ll need to pay each month, which makes budgeting easier. Your monthly payment will stay the same during the fixed period, even if other interest rates increase. On the other hand, your monthly payment will stay the same even if other interest rates decrease. Also, if you want to repay your loan early, there could be early repayment charges.”

Tracker Mortgage

With a Tracker mortgage, the interest rate charged by your lender is linked to a rate such as the Bank of England base rate. This means that your monthly payments can go up or down.

“With tracker mortgages, the rate you pay tracks another headline rate by a set percentage until a set date. If the headline rate changes, your tracker rate changes by the same amount, so normally your interest rate will be following the trends in the marketplace.

“However, it’s worth noting that some lenders impose a ‘collar’ which means the interest rate won’t fall below a certain level, even if the rate it’s tracking continues to reduce. With trackers, your monthly payments can go up or down which can make budgeting difficult.”

Early repayment charges may apply to Tracker Mortgages.

Andrews Mortgage Services provides independent advice on mortgages, with the simple aim of saving you money by moving your mortgage to a lower rate. And if you are buying or selling a home with us, our involvement can also speed up the moving process.

We do not charge for our advice. Instead, we simply charge a fee for processing your mortgage application. Our typical fee is £299, however the actual fee will depend on your circumstances.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Find out more about Andrews Mortgage Services and the latest deals available.

Lists of links to other pages

• The Cost of Buying your Home

  Just what costs are involved when moving home?

  

• What is a Mortgage

  Put simply, a mortgage is just a loan but with a key difference that it’s secured against your home. This means that if you don’t keep up your mortgage payments, your lender may be able to sell your home to recover the money you owe.

  

• Ways to Repay Your Mortgage

  There are two basic styles of mortgage – ‘Repayment’ and ‘Interest Only’.

  

• How much can I borrow

  How much you can borrow depends on several factors. You should find out how much you can borrow before making an offer on a property.