The best mortgage for you will depend on your circumstances, future plans and whether you’re choosing to live in, or rent out, the property.
A mortgage is a long-term agreement. It’s important to take time to think about what you want, and how much you’ll be able to afford. Keep in mind, your home may be repossessed if you’re unable to meet your payments.
Here's a quick guide to some of the different types of mortgages, so you can find one that suits you.
Tracker mortgages follow the Bank of England’s Base Rate and rise or fall along with it. The interest rate charged is the Bank of England’s Base Rate plus an agreed margin. There are ‘lifetime’ trackers for the life of the mortgage, and term trackers which may be for 2 or 3 years.
HSBC currently offers term trackers.
The SVR is the rate of interest that’s usually charged once a fixed rate or term tracker period ends. You can usually move to another fixed or tracker product instead of moving onto a SVR, if you wish.
Some lenders may also let you take out a mortgage on their SVR. Your lender decides the rate and may decide to increase or decrease it over the period of your mortgage.
Currently, customers can’t apply for an SVR mortgage with HSBC.
When deciding on a mortgage, you also have payment choices to make. These options need to be considered carefully:
With a capital repayment mortgage, the monthly repayments include an element which repays the borrowed capital, as well as a payment for the monthly interest of the loan.
With this repayment method, you can ensure your mortgage is fully paid off at the end of the mortgage period.
With an interest-only mortgage, your monthly payment only covers the interest charged on your loan for that month, so the amount you owe in capital doesn’t reduce over time.
You'll need to demonstrate to the lender that you’ll have some way of paying off the debt in the future (such as an investment or a second property you could sell). Interest-only mortgages are commonly chosen when you’re buying to let.
If they are currently available, a 95% loan to value (LTV) mortgage allows first-time buyers to contribute a 5% deposit. If eligible, this means you could potentially borrow up to 95% of your property’s value or the purchase price (whichever is lower).
If you’re buying a property to rent out, you’ll need a buy-to-let mortgage. A buy-to-let investment can be a big commitment, so it’s important to consider costs, responsibilities and the risks of becoming a landlord.
Do some research, use online calculators and speak to people about their experiences. If you’d like advice on which mortgage may be suitable for you, make an appointment to speak to a mortgage adviser.
They’ll review your financial situation and provide suggestions and recommendations, based on the information you provide.
Your property may be repossessed if you do not keep up repayments on your mortgage.