Compare the Market makes it easy to do a mortgage comparison, but first we should look at the kinds of mortgages that are available.
You need to decide if you want a repayment mortgage or an interest only mortgage. You then need to decide whether you want a fixed rate mortgage or one with a variable rate:
With repayment mortgages, you pay off the interest and some of the overall cost of the house every month. At the end, typically after 25 years, you should have managed to pay for the whole house and the interest - you will own your home outright.
With interest only mortgages, you pay only the interest on the loan and nothing off the capital (the amount you borrowed). So after 25 years the mortgage will still be outstanding.
Interest-only mortgages offer lower monthly payments, but you will need to show from the start that you have plans for how you will pay off the loan at the end of the term. However, these aren’t very common.
Variable rate mortgages could be ‘trackers’ where the interest rate is above, below or the same rate as the Bank of England base rate, or fully variable, where your lender decides on a rate and can change this at any time (within the conditions of the product).
Other kinds of variable are available too, like capped or collared mortgages where there might be upper and lower interest rate limits. With any of these your mortgage payments could go up or down as interest rates change.
If you choose a fixed rate, your interest rate and your monthly payments are set at a certain level for an agreed length of time. These, and a lot of variable mortgages, are often 2 or 3 year deals, but you can also get a 5 or 10 year fixed rate mortgage.
At the end of the deal you are automatically switched to another rate, usually a banks standard variable rate.