Your quick guide to mortgages

What is a mortgage?

How do I arrange a mortgage?

In the first instance you would set up a meeting with a mortgage adviser. The call is no obligation and gives you an opportunity to chat with a member of the team, who can talk you through the process and answer all of your questions.

What do the different terms mean?

• Fixed rate mortgage - A mortgage where the interest rate stays the same for the duration of the fixed rate period
• Variable rate mortgage - A mortgage where the interest rate varies depending on changes to a benchmark rate of interest
• Tracker mortgage - A tracker mortgage is a type of variable rate mortgage which "tracks" a base rate – usually the Bank of England's base rate
• Base rate - The base rate of interest is set by the Bank of England and is the amount it charges banks and lenders for borrowing money
• Discount mortgage - A mortgage where the interest rate is pegged at a certain amount below the lender’s standard variable rate

Fixed or Variable?

Fixed rate offers peace of mind and is easier to budget for, as you’ll know what your payments are going to be, however they can, at times, be more expensive than variable rate mortgages (eg you might pay a higher interest rate).

One thing to bear in mind with a fixed rate is that if interest rates go down, you wouldn’t see the benefit. To take advantage of interest rates going down, you’d need a variable rate mortgage (sometimes known as discounts or trackers).

Variable rate mortgages are generally a little bit cheaper and if rates come down your mortgage payment will come down too, but on the other hand if rates do go back up then your mortgage payment might go up as well.

Arrangement Fees

Some mortgages have arrangement fees which can be substantial. It’s always worth asking your mortgage adviser about these as a mortgage with a slightly higher interest rate but no arrangement fee might still work out cheaper than a lower rate mortgage with a fee.

Deposits

Paying a deposit not only assures the seller that you are committed to buying the property, it also reduces the amount of your loan (mortgage). Paying more deposit can open up better mortgage deals. Generally, the bigger the fee you pay up front (the deposit), the lower the interest rate.

At The Cumberland we currently offer a minimum of 5% deposit mortgages (subject to conditions).

Mortgage Calculator

Our mortgage calculator is a great tool when buying your first home and can give you an idea of what you can borrow and how much it will cost you each month.