The Different Types Of Building Society Mortgages

Unless you have the luxury of being able to turn to a lump sum in order to acquire your dream house, it’s likely that you may have the chance to sign with a building society in order to secure the necessary funding. Before you do so it’s always wise to conduct a little research on the types of finance options available to you, just so you know how to source the best deal.

Lost already? Well, building societies and therefore the mortgage rates from building societies – as opposed to banks – are member-owned institutions found in the UK and British Commonwealth countries that provide a range of lending products, very much like the options offered by banks. Many building society loans are in fact mortgage products for prospective homeowners, which is where you come in.

The only issue is knowing what to go for when you’re faced with the decision. Every provider will compete to provide a lower interest rate on a deal if they decide you are someone good to lend to – here are a few options they’ll likely have to offer.

Fixed rate mortgages

Perhaps the most popular option among homeowners is the fixed rate mortgage, which guarantees a fixed interest rate for the entire term. As the title suggests, this rate does not change during the entire duration of the loan, which can range from anything as little as two years right the way up to 25 in some rare cases.

This model will allow you to plan your finances and organise a budget to run alongside your monthly payments. You can therefore rest assured, safe in the knowledge your product will not be affected by interest increases during the period in which the fixed rate applies.

Variable rate mortgages

As the title hints, when you are considering choosing variable rate mortgages you are expected to pay the required interest rate – which in this case could change during the period of your mortgage. The monthly payments decrease if interest rates fall, but payments may also increase by the same logic.

The benefits of this product are obvious. If you believe the market will improve, you may fancy your chances of getting a better deal in the long run. Furthermore, the initial interest rate of this product is usually lower than a fixed rate mortgage – something which may interest borrowers on a tight monthly budget. Any changes to your monthly repayments may be calculated on a set month each year, taking into account any increases or decreases in interest rates.

First time buyer mortgages

Due to the trouble that some Brits have with taking their first step on the property ladder, societies have started to offer products designed to help them along the way. These will commonly include much lower deposits as part of a fixed rate deal.

The fixed rate terms present a safe option for first-time buyers, while the low deposit value (usually in the single figures, down from around 20 per cent) allows them – and possibly you – to declare an interest right away.

Buy-to-let mortgages

If you’re so much as looking into a buy-to-let mortgage, you should understand this isn’t for the first-time buyer keen to purchase a home for themselves. Buy-to-let products allow prospective landlords to borrow money in order to buy a property for rental purposes.

 Article by Brandon Watts-A research student in Accounting & Finance, I am keen to keep myself updated about anything and everything related to business & finance.