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London Property guide to mortgages

A first time buyer's mortgage guide

If you're tired of renting, the time may be right for you to consider purchasing a property for the first time. There are a wide range of mortgage types available, and this can be a little confusing for first time buyers. To help you make sense of your options, we've compiled a summary of the main mortgage types to get you started, making it easier to see which suits your needs.

Repaying your mortgage

You have two main options when it comes to methods of repaying your mortgage loan. Choosing a repayment mortgage means that you will make payments each month until you have paid off your mortgage amount and the interest on your mortgage loan.

You can also choose an interest-only mortgage. This way, you still make monthly repayments, but these payments only cover the cost of your mortgage interest. You will be required to repay your actual mortgage loan back in one lump sum when your mortgage term ends.

This means having to save money up in an account or in investments so that you have enough money to pay back your mortgage amount at the end of the term. This means that your monthly mortgage repayments will be lower, but you will have to factor in the cost of paying into a savings account too.

Type of interest

Once you have chosen your repayment method, you have to choose the type of interest rate deal you want. There are several options:

Standard variable rate - this means that the interest rate on your mortgage will change in line with your mortgage lender's interest rate, so the cost of your mortgage repayments may go up or down.

Discounted rate - this means that the interest rate you pay at the start of your mortgage term is at a lower, discounted rate. Your interest rate will then change to a different rate once the discounted period is up. The discounted period will vary from lender to lender, and the new rate will usually be your lender's standard variable rate.

Tracker - this means that your mortgage interest rate 'tracks' the Bank of England base rate, so as the Bank of England rate rises or falls, so too will your mortgage interest rate.

Fixed rate - a fixed rate can make it easier to budget for your mortgage as you pay a fixed interest rate for a set period so that your monthly repayments do not change. When your fixed rate period ends your interest rate will usually change to your lender's standard variable rate.

Some mortgage lenders provide mortgages specifically tailored to first time buyers. Major lenders like Santander have first time buyer mortgages available, and you can find details of these online.

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