There are really only two main types of mortgage, "Repayment" or "Interest". It's the many variations on them which make things seem more complicated than they have to be. Once you have decided on this option you need to choose which mortgage product to have.

The main variations of Repayment and Interest Only mortgages are outlined here.

This type of mortgage is where you and the mortgage lender agree to fix the interest rate owed on your loan for a set period of time.

The period of time is usually between 1 and 5 years but could be longer. (That simply depends on the exact mortgage deal you choose).

After the agreed period, the interest rate owed on your loan usually reverts to the lender's Variable Rate.

If you want to leave before the agreed there will be an early repayment charge. For example you may be charged six months gross interest if you leave a five-year fixed rate agreement.

Some early repayment charges can go beyond the fixed-rate period. Always read the small print and ask as many "stupid questions" as you feel like. You must be clear on what everything means.

The name might be a bit esoteric, but a base-rate tracker is actually just a mortgage with an interest rate that tracks the Bank of England's base lending rate.

These deals can last for a few years, reverting to the lender's standard variable rate after that. they can be for the whole mortgage term known as a lifetime tracker.

For instance, you might find a mortgage deal with the interest rate set at base rate plus 0.25 per cent for two years, or base plus 0.75 per cent for life.

Most lenders set their standard variable rate at about 2 per cent over base, so effectively this is a type of discount deal.

Every time the Bank changes its base rate, your interest rate will change by exactly the same amount.

This is an interest repayment variation.

Capped rate mortgages are supposed to offer the best of both variable and fixed rate deals.

You agree to have a limit - a cap - on the maximum amount of interest you will pay over a particular period of time while allowing it to fall if the variable rate drops.
Good Points: You get the best of both worlds. If the variable rate goes higher than your agreed capped rate then you're only paying up to the agreed capped rate. Wheras if it falls below your capped rate then you pay less as well. So you benefit from falling interest rates but are protected from rate rises. You know the max you'll be paying.

Bad points: There's only a limited number of these deals on the market and they're not thought to be very competitive because the interest rate you'll be paying is going to be higher than your average fixed or discounted rate mortgage.

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This is an interest repayment variation. To tempt new customers most lenders will offer a new borrower a discount on their standard variable rate, for a set period.

Your payments will go up and down, as with a standard variable mortgage, but you're paying less.

After the agreed set period the interest rate will switch into the mortgage lender's usual variable rate.

So it may be worth checking what their track record has been for their variable rate charge because, if they're pricier than most, they're unlikely to have changed and you may end up as one of the mugs paying over the odds.

The rate for new borrowers is usually lower than for existing customers. So try to shake off that customer inertia and change mortgage lenders every couple of years - having checked, of course, that there's no penalty for leaving.

The penalties for changing to another mortgage lender may last longer than the agreed discount term. But they're usually less than for a fixed rate period.

Good Points: This kind of deal is likely to be especially appealing at times when interest rates are rising but are expected to stabilise or fall in the relatively near future. The initial fix protects you from further increases, while moving to the tracker rate without the costs or hassle of having to remortgage allows you to benefit right away from any subsequent falls.

Bad points: The interest rate for the fixed period and the percentage it then tracks above base rate may both be higher than for market-leading traditional fixed or tracker deals. You may need quite a substantial deposit to be accepted for this type of mortgage which will probably make it more suitable for remortgage customers than the average first-time buyer. There is likely to be an early repayment charge which stretches well beyond the initial fix, to ensure you don't take advantage of this then move to a better deal with another lender.

The shorter the term the better. You probably don't want to tie yourself down for longer than 2 years.

This is a new kind of mortgage deal designed to appeal to borrowers who want the security of an interest rate that starts out fixed, but don't want to get stuck paying over the odds if rates begin to fall.

It kicks off with a fixed rate for, say, a year and then turns into a tracker, with interest charged at a set percentage above the Bank of England's base lending rate for the rest of the mortgage term.

Every mortgage lender has a standard variable rate, or SVR, of interest on which it bases all its mortgage deals.

The standard variable rate is, in turn, based on the Bank of England's base lending rate and this is decided at monthly meetings of the Bank's monetary policy committee, or MPC.

Every time the MPC raises its rate, mortgage lenders race to increase their standard variable rates, generally by the same amount.

And every time the MPC lowers its rate, the lenders do too, only often not so quickly

But that doesn't mean mortgage lenders charge the same as the Bank of England.

Mainstream lenders these are banks, building societies and other financial institutions which target customers with reasonable credit ratings a generally set their standard variable rates at about 2 percentage points above the Bank of England's base lending rate.

This means if the base lending rate is 5.5 per cent, most SVRs will be around 7.5 per cent. But some lenders will set theirs higher, while others, who are trying to increase their customer base, might go a bit lower.

Impaired credit lenders who specialise in lending to customers with poor credit histories tend to set their standard variable rates far higher, arguing that this is only fair since they are taking a much greater risk.

If you have a reasonable credit history, there is no reason why you should pay a costly standard variable mortgage rate.

Your home may be repossessed if you do not keep up repayments on your mortgage.

For mortgages we can be paid a commission from the lender, or a fee, usually 0.4% of the loan amount or a combination of both.

CAUTION: This is a rough guide only. Please contact us for an official quote.

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Mortgage rates can go up as well as down.