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When choosing a mortgage you want to make sure that you get the best deals around but if you are a first time buyer (and even if you aren't) you may not fully understand all the different options available to you. There are several types of mortgage that all have their pros and cons and analysing your financial situation will enable you decide which one is the best deal for you.

If you are undecided as to which mortgage is the best for you then here is a quick explanation about the main types. Remember, if you are still unsure then you can seek advice from mortgage brokers that will be able to give you detailed advice and provide you various options.

Variable and Fixed Rate Mortgages

These types of mortgages are the most common. Variable rate mortgages are when the interest rate on your repayments is set against the Bank of England base rate. A lender will normally set its standard variable rate (SVR) around 2% higher than the base rate. If interest rates fall then your repayments will follow suit but if there is a rise in interest rates then your repayments will increase.

Fixed rate mortgages are a good choice in unstable economies such as the UK's economy in recent times, because the interest rate is set at a certain percentage and does not change throughout the length of the agreement. Fixed rate mortgages are better for those on a budget as you will know what exactly is going to come out of your account each month.

Capped Rate Mortgages

These types of mortgages are similar to fixed rate mortgages in that the interest rate on your repayments will never go above a certain percentage. However, unlike fixed rate mortgages you will receive the benefits of a reduction in interest rates. However, not many lenders offer these and the length of the contract are usually shorter than with other types of mortgages.

Tracker Mortgages

Tracker mortgages follow the base rate set by the Bank of England plus a small percentage which means if the base rate falls, so does your interest rate. The advantage of tracking the base rate rather than the SVR of the bank is that banks can alter their SVR at any time to coincide with their commercial intent. Tracker mortgages are quite transparent and simple products which normally mean they come with lower fees than other types of mortgage.

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