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, 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.

Due to uncertain global economic situations you can never tell when the mortgage rates will go up. For a long term money lending schemes, such as home loans, the fixed rates mortgages are one of the best options.

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.

In recent years, banks and financial institutions have raised the mortgage rates. Fixed rates mortgages don’t get affected by the changes, but the variable mortgages do. Since the building society also comes under the financial institution, your monthly repayments will depend on the changing rates.

Mortgage

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.

One of the benefits of the building society mortgages are that is more flexible in its offering than the banks and others financial institutions. The building society aim is to help people find the easy financing for their home. If you are a first time buyer and afraid to take the mortgage out on your property, look at the some of the options. Take advantage of being a first time buyer and enjoy the lower mortgage rates.

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.

You will be paying the mortgages by the money you earn from renting the property. There are a few precedents for qualifying for this type of loans like, you must have a good credit score and have decent monthly income. The interest rates are usually higher, and you don’t have to pay each month, rather you pay the full capital at the end of the mortgage terms.

The Bottom-Line

Building society mortgages offers some of the best options for building or buying a house. Choose your options based on what suits your financial situations.