You may need professional advice when arranging your mortgage loan, unless you are a competent financial advisor or broker. UK mortgages are financed exclusively by banks or financial organisations. There is no market interference by government bodies. Hence, the mortgage market in UK is highly competitive. Also, you can choose from a variety of mortgages, the type that suits you the best.

Most mortgages offered by UK companies work on a variable interest rate. Normally, the variable rate is fixed by the Bank of England. As the market is competitive, the lenders are keen to offer a rate that is somewhat lesser than the variable rate. Also, some companies offer a discount rate on mortgage loans. The discount rates may be applied for first few years of the mortgage. So, this makes the initial mortgage payments lesser than the payments made later. Even some lenders proffer capped rates. This thoroughly benefits the borrower, as the capped rate will be the maximum rate that the borrower will be paying even when the variable interest rates increases to a larger extent.

Some lenders give a cash-back incentive on the mortgages. These cash-back incentives are calculated with respect to the principal borrowed amount. The borrower will receive a certain percentage of the borrowed amount at the end of the mortgage. If a borrower wishes to close his mortgages earlier than the fixed term, then he has to pay pre-payment penalties. That is, he will be charged an additional amount along with the total amount to be paid towards the mortgages. Normally, the pre-payment penalty is calculated as some percentage of the outstanding amount.

There is another type of UK mortgage – a self certification mortgage. Mostly self employed persons who have no means to prove their income opt for this mortgage. If the borrower borrows an amount less than the value of the house and he makes a down payment, then the lender will offer him the self-cert mortgage. But, these mortgages carry higher rate of interest due to the risks involved for the lender.

In a fixed interest mortgage, you will get a fixed interest rate for the whole period of the mortgage or for some years. Normally, 2 to 5 years is the period for fixed interest mortgages. The borrowers can rest assured that the interest rates will not fluctuate and they have to pay only a fixed monthly payment. But, the fixed interest rate is offered at a slightly higher rate of interest and hence if the interest rate falls, then the borrower may feel sorry for his decision.

So, while getting a mortgage for your home, evaluate the risks involved and your repayment capacity. If you can repay the monthly installments without any delay, then only you will have peace of mind. Otherwise, you may get a bad credit history. So, you should thoroughly study every detail before getting mortgage. Also, if you feel that your rate of interest on your mortgage offered by the company is higher than the prevailing market rate, you can refinance your mortgage from some other company.