Mortgages: what are they?

A mortgage is likely to be the most expensive and important financial arrangement of most people’s lives, so it’s vital to know what you’re letting yourself in for. Financial institutions such as banks and other lenders provide the loan capital up front as payment for a property; in return, the buyer agrees to meet a repayment schedule, usually over a considerable time period such as 30 years (called the 'term' of the mortgage).

Although there are several different types of mortgages with different features, such as interest only or endowment mortgages, the most common type of mortgage is the interest and capital repayment mortgage, whereby each fixed mortgage repayment pays both an interest amount depending on the loan outstanding, and a capital repayment, which goes towards reducing the loan outstanding.

When choosing a mortgage, many people deal directly with the mortgage provider, who generally publish information about their mortgage products on their website and through their branch network. There are also several websites which compare the interest rates offered by different providers. Alternatively, you may wish to consult a mortgage broker, who assesses your individual situation and advises you on which provider and type of mortgage best suits your needs.

The main advice is to take your time and investigate all options thoroughly, as a mortgage is probably the most important financial decision you will ever make So be careful and ensure that you make the best decision that suits you and your financial situation!