This does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Dental and Medical Financial Services Limited is an appointed representative of Best Practice IFA Group Limited, which is authorised and regulated by the Financial Conduct Authority.
It can be overwhelming to see all the different options available to medical professionals when it comes to mortgages, but it’s essential that you arm yourself with information about various mortgage types so you can make the right decision. Of course, generally, they are all based on the same premise that you pay back what you’ve borrowed, with interest, but because options vary greatly, the one you ultimately choose will depend on a few different factors. To learn more about popular mortgage types, read on.
The make-up of a mortgage
While all mortgages will require full repayment with interest, how the interest is calculated and the repayment terms do set them apart.
There are two main types of mortgages with various options underneath.
A repayment mortgage is the most common type of mortgage in the UK where you pay towards both the capital and the interest each month. The biggest advantage of this type of mortgage is that by the end of your mortgage, as long as you keep up with your repayments, you’ll own your property outright.
With an interest-only mortgage, you are only responsible for paying back the interest each month. However, at the end of the mortgage term you will have to repay the capital in full. If you don’t plan to sell the property, which is usually how people handle repayments with this kind of mortgage, you will need another plan to pay your lender back. Interest-only mortgages are a good option for people who anticipate that their income will increase over the years and plan to sell their home by the end of the term.
Popular mortgage types
The stage of life that you are at, and where you are in your medical career will help dictate what kind of mortgage is right for you. Here’s a breakdown of the most popular types of mortgages.
A fixed-rate mortgage has an interest rate that is set for a specific period of time, usually between two and five years, but can be 10 years. Even if interest rates change, your monthly repayment amount won’t during your fixed-rate period. Because your payment stays the same each month, a fixed-rate mortgage is great for providing a sense of stability and allows you to plan and stick to a budget. As a busy doctor or other medical professional, this option gives you peace of mind of your mortgage outgoings for the next few years.
It’s important to remember that when your initial term ends, your interest rate will revert to your lender’s standard variable rate (SVR). These are usually much higher than your initial rate, so you might want to look at remortgaging options to avoid a drastic change in your monthly and overall repayment amount.
A tracker mortgage rate is set at a certain point above the Bank of England base rate. The benefit of tracker mortgages is that rates tend to be lower than fixed-rate mortgages. Just like with a fixed-rate mortgage, after your initial term is up, you’ll need to decide if you want to let it roll over to a SVR or search for a new mortgage deal.
The best option for you
Whether you’re a first-time buyer, looking to upgrade, hoping to downsize, or even considering remortgaging, you have a lot of options to finance your purchase. To learn more about the options you have and for help finding the right mortgage product for you, reach out to the experts at Dental & Medical Financial Services, specialist mortgage providers to the medical sector.