What types of non Conventional Mortgages are there in UK?

  • Current Account mortgage. This type of mortgage is becoming increasingly popular. It works on the principle that your mortgage is held in the same bank account as your ordinary current account. If you have an influx of money into your current account it automatically reduces the size of your mortgage. Therefore you will be pay a lower interest rate. This is beneficial because the interest on mortgage payments is likely to be higher than the interest paid from a current account. A reason why people may dislike this type of mortgage is that it is intimidating to have such a big overdraft.
  • Flexible Mortgages. Flexible mortgages allow people to pay variable amounts of monthly repayments. This is good for people who are self employed and have variable income patterns. However it does require discipline to pay more than the average monthly income. It could save money in the long run if it is used to pay off the mortgage early
  • Cash back mortgage. A cash back mortgage is similar to equity withdrawal. The main idea is that a mortgage is used to borrow cash against the value of the house. With a cashback mortgage a borrower takes out more equity than he needs to buy the house. This type of borrowing may be cheaper than borrowing on credit cards.
  • Self & Certification Mortgages. A self certification mortgage is used where a borrower is not able to easily prove his income. In a conventional mortgage typically a lender is willing to lend a certain multiple of a person’s income like 3 or 4 times. A self certification mortgage is sometimes used when a borrower wishes to borrow much more than his provable income. However self certification mortgages are becoming more regulated in recent years.
  • Offset Mortgage. An offset mortgage is very similar to a current account mortgage. Money from one account is used to offset the mortgage balance. However the difference is that the money is in different accounts.
  • Interest Only Mortgage. A mortgage where only interest is paid on the mortgage. The borrower has to find an alternative investment scheme to pay back the mortgage at end of mortgage term

There is an increasing array of non conventional mortgages on the market. Increasingly, even mainstream lenders, are not sticking to conventional rules about borrowing. The choice of mortgages is often overwhelmingly; this is because often mortgages are combined e.g semi fixed mortgages combined with a current account mortgage.