So, how exactly do I pay for a house?
What are the different types of mortgages?
There are 3 main types of mortgage:
Repayment
You pay back the amount you borrowed, and the interest, over the agreed period. The loan is completely paid off at the end of the term and the property belongs to you.
Interest only
You pay just the interest to your lender each month. Then, at the end of the agreed term, you need to pay back your loan in full. This capital can come from savings, investments, pensions and shares and your lender will take a view on whether your chosen repayment strategy looks likely to pay off the capital at the end of the term.
Offset mortgage
An offset mortgage is an interest only mortgage. Basically, the money you have in your savings account is used to offset the money you owe on your property. So, if your mortgage is £100,000 and you have £20,000 in your savings account, you only pay interest on £80,000. If you need to dip into your savings, it’s cool – it just means that the amount you owe interest on goes up as your savings go down.
first direct Offset Mortgages are only available to existing Offset Mortgage customers.
Affordable home ownership schemes
The government’s Affordable home ownership schemes were set up to help people buy a home. There are a few options available, and certain criteria to fulfil so it’s worth doing some research. Just remember that the schemes are usually intended to work with a mortgage, not replace one, so if you’re eligible, it’s likely you’ll still need to get a mortgage to finance your property.
Although we’re not participating in the affordable home ownership schemes, we’ve included some information on these below:
Shared ownership
The shared ownership scheme was set up by the government to help you if you want to buy a home but don’t earn enough money to purchase outright. You buy just a share of a property, between 25% and 75%, from one of the UK's housing associations and then you pay the housing association an 'affordable rent' on whatever part you don't own. Later down the line you have an option to purchase a bigger share if you can afford it.
Visit the gov.uk Opens an overlay [Will show a security message first] website to find out more about how the shared ownership scheme works.
Right to Buy
The Right to Buy scheme was set up to help council house and housing association tenants purchase their home at a discounted rate. It’s available to you if you’ve lived in your council or housing association property for a minimum of three years – as long as you intend to continue using it as your main home. The discounts available depend on where in the UK you live so for more information visit the gov.uk Opens an overlay [Will show a security message first] website.
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Our mortgages explained
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