Understanding different HSBC mortgages and repayment types

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When it comes to picking a mortgage, there's so much choice. Our plain and simple guide to different HSBC mortgage and repayment types tells you what they are and how they work.

What types of mortgages does HSBC offer?

Fixed rate mortgages
With a fixed rate mortgage, the interest rate and monthly payments remain the same for the fixed rate period, which is usually either 2, 3 or 5 years. When the fixed rate period ends, your mortgage will revert to our standard variable rate which can either go up or down from time to time. Your monthly payments will change with each movement in our standard variable rate.

Pros:

  • Good for budgeting as your monthly payments will stay the same for the fixed rate period
  • Peace of mind if you think interest rates will go up during the fixed rate period

Cons:

  • You won't benefit from lower payments if interest rates fall below your fixed rate during the fixed rate period
  • Early Repayment Charges will apply if you want to switch deal, make lump sum repayments or repay your mortgage in full before the fixed rate period ends

Tracker mortgages
With these mortgages, the interest rate you pay is variable and is an agreed percentage above the Bank of England's Base rate. As the Base Rate rises and falls, your interest rate will track these changes, and this will effect your monthly payments accordingly. With our 'Lifetime' trackers, your deal will last as long as the life of your loan.

Pros:

  • You'll pay less each month if base rate goes down
  • If base rate rises, you can choose to switch to another rate (although a booking fee may apply)
  • You can make unlimited overpayments without incurring an Early Repayment Charge

Cons:

  • You'll pay more each month if base rate goes up

What are Fee Saver mortgages?

Some of our fixed rate and tracker mortgages are available as 'Fee Savers'. With a Fee Saver, you won't pay a booking fee, standard valuation fee or a completion fee, which could be ideal if want to minimise the upfront costs of buying your new home.

Here are a few things to bear in mind about Fee Saver mortgages. We'll cover the cost of a standard valuation if we require one as part of your mortgage application. Other fees and charges may be payable to other parties, including legal fees and charges levied by your existing lender if you have one.

What are my different repayment options?

Capital repayment
In a nutshell: pay off a little at a time as you go

You can choose a repayment term up to 30 years. Each monthly payment you make is made up of interest on the loan and some of the amount you've borrowed. So at the end of the chosen term, assuming you've made all of the monthly payments on time, your mortgage loan is cleared.

You might consider a capital repayment option if…
You want the reassurance of knowing that your mortgage will be repaid at the end of the term.

Interest-only repayment
In a nutshell: pay it all off at the end

You can choose a loan term up to 25 years. Each monthly payment you make only pays off interest on the loan and none of the amount you've borrowed. So at the end of the chosen term, you still owe the amount you originally borrowed.

Note: You are responsible for making your own arrangements to repay your mortgage at the end of the mortgage term. This could be through an endowment scheme or some other savings and investment plan. Your property may be repossessed if you do not have sufficient funds to repay the capital balance outstanding at the end of the term.

You might consider an interest-only option if…
You want your initial payments to be lower and want to free up cash to invest in order to pay off your mortgage balance at the end of the mortgage term. You must also have or open an HSBC Premier Bank Account and meet our HSBC Premier eligibility criteria. Find out more.

Please note, you'll need to show that you understand you're responsible for repaying your interest only mortgage at the end of the term. That means having a suitable repayment strategy in place - this could be an endowment scheme or other savings or investment plan.

Your home may be repossessed if you do not have sufficient funds to repay the outstanding mortgage balance at the end of the term.

What's next?

To help you compare different types of HSBC mortgage deals, use our mortgage calculator to calculate your loan-to-value (LTV). This gives you an idea of how much you could borrow based on the overall value of the property you want to buy or remortgage.

Example LTV calculation:
£100,000 property with a £75,000 mortgage = 75% LTV

Find and compare HSBC mortgages