When you choose a mortgage, you'll need to think about the repayment method, different interest rate deals and the special features of some mortgages. The best mortgage for you will depend on your own circumstances. It’s therefore important to understand your options and shop around for the best deals.
There is now a vast array of different types of mortgage including discounted rates, trackers, fixed rate and capped (or cap and collar).
Discounted rate
You pay a lower interest rate to begin with then move to another rate (usually the lender's standard variable rate) after a set period.
Tracker
Tracker rates are linked to the Bank of England rate or some other 'base rate'. This means they'll always go up or down in line with changes to the base rate.
Fixed rate
You pay a fixed rate of interest for a set period, so you know exactly what you'll be paying each month during that time. When the fixed period ends, you'll usually move to the lender's standard variable rate. There are usually penalties if you pull out early.
Capped or cap and collar
With a capped rate you pay a variable interest rate, but there's a ceiling so your payments won't go above a certain amount for a set period. Some deals include a collar too - this is the lowest rate you'll get. If interest rates fall below the collar, you'll lose out.
Suitability of different deals will depend on your personal circumstances and any tie-ins or penalties that may be attached.
