The main types of...

The main types of mortgages

18 October, 2021

Like many “responsible adult” decisions these days, deciding which mortgage is right for you and your situation can be a difficult and stressful choice to make as there are multiple options.

The first decision you will need to make is if you want a repayment mortgage or an interest-only mortgage.

Repayment Mortgage

With a repayment mortgage, you can expect to pay back the capital (the amount borrowed) and interest in monthly instalments over the term of your mortgage. Provided that you make all of your payments every month, you will have paid all of loan off by the end of the mortgage term.

At the start of your mortgage term, most of your monthly payment goes towards paying off the interest rather than the actual loan but in a few years, this will change and your monthly payments will begin to chip away at the balance of your loan.

Interest-only mortgage

With an interest only mortgage you only pay off the interest for the full term of your mortgage which means that your monthly payments are lower, but you are still required to pay the full loan amount back in one lump sum at the end of your mortgage term.

The types of repayment mortgages


If you have a fixed-rate mortgage, your interest rate is guaranteed to stay the same for a set period which makes them the most popular type of mortgage. The most appealing benefit to this mortgage is that you know that your payments are going to stay the same every month, but this also means that if the Bank of England base rate drops, you will still pay the same amount of interest regardless.


When you have a tracker mortgage the interest you pay follows the Bank of England base rate plus a rate agreed with your lender. The Bank of England decides whether to increase or decrease the base rate depending on how the economy is performing which means that your monthly mortgage payments will change with it.

Standard Variable Rate (SVR)

When you have finished the agreed term of your fixed, tracker or discount mortgage, you are usually automatically transferred onto a standard variable rate unless you decide to move to another fixed or tracker mortgage.

The lender sets the interest rate, and this can change every month for different reasons. These types of mortgages tend to have higher interest rates than other mortgage products, but they also tend to be more flexible than other products e.g., you may not be charged early repayment fees if you decided you wanted to move house.

In conclusion, all the products available on the market have their pros and cons however the most popular types of mortgages are fixed-rate mortgages. Ultimately, deciding which mortgage is right for you is down to your circumstances and what your plans are for the future.

Editorial Disclaimer: This article was updated 18.10.2021.

Opinions expressed here are the author's alone, and not those of any bank, credit card issuer or any other company. This article has not been reviewed, approved or otherwise endorsed by any of these organisations. NB: The information on this page does not constitute financial advice, please do your own research to ensure that the product / service is right for your individual circumstances.

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