Mortgages are specific loans designed to allow people to buy a property. To get one, the lender will assess your finances and ability to make the repayments monthly. You will also have to pay a deposit upfront. This is at least 5% of the total value of the mortgage.

If you’re looking into buying your first home, chances are you will have to get a mortgage to cover the cost. Peabody New Homes has reached out to friends at Meridian Mortgages to provide you with a complete guide to mortgages.

What types of mortgages will be available in 2024?

There are plenty of types of mortgages available on the market in 2024. Within those types of mortgages, different lenders offer deals. To give you a general understanding of the world of mortgages, let’s dive into the types that are currently available on the market.

Fixed-rate mortgages

Fixed-rate mortgages are a common type of mortgage option available to borrowers. When obtaining a mortgage, borrowers are required to repay a set amount of money each month, which includes both the repayment of the principal amount borrowed and the interest charged by the lender. The interest charged is calculated at a predetermined rate agreed upon between the borrower and the lender. With a fixed-rate mortgage, the interest rate remains constant for a specified period, typically ranging from two to ten years, as determined during the mortgage application process.

Tracker mortgages

A tracker mortgage is a type of variable rate mortgage for which the interest rate you pay each month on your repayment can fluctuate. Typically, tracker mortgages are linked to the Bank of England's base rate in the UK. This means that as the base rate set by the Bank of England changes, so does the interest rate on your mortgage. The adjustments in your mortgage rate usually occur shortly after any changes to the base rate, ensuring that your mortgage payments reflect current market conditions.

Some tracker mortgages may come with certain terms and conditions, such as a minimum or maximum interest rate cap. Understanding the terms and conditions associated with tracker mortgages is crucial for borrowers to make informed decisions about their mortgage options.

Standard Variable Rate mortgages

A standard variable rate mortgage, often abbreviated as SVR mortgage, represents the mortgage arrangement that borrowers transition to once any introductory deal or fixed-rate period expires. Upon the conclusion of the initial term, borrowers are automatically transferred onto the lender's standard variable rate. Unlike fixed-rate mortgages, the interest rate on an SVR mortgage is not fixed and can fluctuate in response to changes in the lender's discretion or broader economic conditions. This variability means that borrowers may experience adjustments in their mortgage payments as the interest rate rises or falls over time.

A couple is discussing options with a mortgage advisor

Working with a mortgage advisor can help you find the most suitable mortgage for your situation

Discount mortgages

Discount mortgages represent a type of mortgage deal where borrowers are offered an interest rate based on their lender's standard variable rate (SVR) minus a predetermined discount percentage. As a result, the interest rate charged on a discount mortgage fluctuates in line with changes to the lender's SVR. This means that borrowers may experience variations in their monthly mortgage payments as the underlying SVR changes over time. Borrowers considering a discount mortgage should carefully evaluate their financial circumstances and assess their ability to afford potential fluctuations in mortgage payments. On top of that, it's important to understand the terms and conditions associated with the discount period, including the duration of the discount and any restrictions or limitations that may apply.

Specialist mortgages

Specialist mortgages are loans for people who can't get regular mortgages because they don’t meet the usual criteria. They aren’t always wholly different products, they can be mortgages that are given under specific conditions for people who can’t get regular ones.

1. Mortgages for buyers with bad credit

They are designed to allow borrowers with poor credit score to get a loan to buy a home. Lenders will agree to lend money despite your bad credit at a higher interest rate. You might be offered less money because of your poor credit history and ratings.

2. Mortgages for self-employed buyers

They are the same as a regular mortgage. The difference lies in the evidence required when it comes to proving how much you earn and how reliable your income is. You will for example be asked for certified accounts from the past two years or more along with a tax year overview covering the past two years or more.

4. Mortgages for Shared Ownership

They allow you to purchase your home through this government-backed programme. It means you are purchasing a share of the property and will pay rent on the remaining parts. Once you have applied and passed the checks to buy a home through Shared Ownership, you need to make sure you reach out to lenders who offer mortgages to buy this way.

5. Guarantor mortgages

This type of mortgage refers to a specific home loan for which another person acts as a guarantor and is therefore liable for paying back your mortgage if you’re no longer able to. In most cases, parents choose to be guarantors to help their children step onto the property ladder.

How can I assess how much I can borrow?

Before starting your mortgage application journey, it can be useful to assess how much money you can afford to borrow based on your financial situation. Our friends at Meridian Mortgages have built a mortgage calculator that allows you to access an estimate of the amount you could potentially get from a lender. All you need to do is enter your annual gross income as well as the amount you have saved for a deposit.

You can also rely on the support of a financial advisor or mortgage advisor to help you with your mortgage application. You can have a look at the list of financial advisors and solicitors we have put together to support you in your homeownership journey.

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