According to Nationwide, the prices of homes in the UK dropped continuously from March to May, 2017. This is the first time home prices fell for three months in a row since the financial crisis reached its peak in 2009. If you are planning to buy a home, now is an opportune time to do so. One of the main considerations you need to make when purchasing a home is choosing the right mortgage. If you want to know which mortgage plan best suits your needs, you need to have at least some knowledge of the different types of mortgage available.

Basic Information about Different Mortgage Options

Fixed Rate Mortgage

In a fixed rate mortgage, the interest rate will remain unchanged throughout the term of the loan, regardless of interest rate fluctuations. This type of mortgage makes it easier for you to budget, but it usually comes with a higher rate and can be costlier overall if interest rates fall.

Variable Rate Mortgage

If you choose to get a variable rate mortgage, you have to be prepared for the interest rate to change any time. It is advisable that you set aside some savings to deal with higher payments in case the interest rate rises.

Standard Variable Rate Mortgage

This type of mortgage uses the normal interest rate set by a lender, and it will stay the same throughout the deal or until another mortgage is taken out. Nonetheless, the interest rate can change following a change in the Bank of England base rate.

Discount Mortgage

This mortgage comes with a discount off the standard variable rate set by a lender, and it typically lasts for two or three years.

Tracker Mortgage

A tracker mortgage offers an interest rate that is pegged to another interest rate, which is usually the Bank of England base rate plus a certain percentage.

Capped Rate Mortgage

The interest rate in a capped rate mortgage follows the lender’s standard variable rate, but it cannot increase beyond a certain level.

Offset Mortgage

An offset mortgage is linked to your bank account, and you only pay interest based on the difference.

Reverse Mortgage

If you have full equity in another home, you can use it to apply for a reverse mortgage. The proceeds from a reverse mortgage can be used for any purpose, including buying a new home.