Mortgage Types Explained: What Different Types of Mortgages are Available in the UK?

Choosing the right mortgage type matters just as much as choosing the right lender. The cheapest headline rate isn't always the best deal once fees, repayment method and your own finances are taken into account. This guide explains each type of mortgage available in the UK, with the pros, cons and who it typically suits.

Repayment Mortgage vs. Interest-Only Mortgage

Repayment Mortgages

You repay both capital and interest every month, so your balance steadily falls until you own the home outright at the end of the term. If you move house, you can either repay the loan in full and take out a new one, or port your existing mortgage to the new property, subject to the lender's approval. Almost all residential mortgages taken out today are repayment mortgages.

Suits buyers who want to own the property outright by the end of the term.

Interest-Only Mortgages

You pay only the interest each month, and the full amount borrowed is still owed at the end of the term. Monthly payments are significantly lower than on a repayment mortgage, but you need a credible plan to repay the capital, such as savings, investments, or selling the property, or you may be forced to sell. Over the life of the mortgage, this typically costs more in total interest than a repayment mortgage.

Suits borrowers who are confident they'll have the funds to clear the balance at the end of the term.

Fixed-Rate Mortgage vs. Variable-Rate Mortgage

Fixed-Rate Mortgages

Your interest rate is locked for a set period, typically two, three or five years. When you take out a fixed-rate mortgage, you are effectively locking in your rate regardless of what happens to the Bank of England base rate during that time, which makes budgeting predictable. The trade-off is that leaving early usually triggers an exit fee or early repayment charge, and you won't benefit if rates fall, though you're protected if they rise. At the end of the fixed period, you'll typically move onto the lender's standard variable rate, which is usually higher, so most borrowers remortgage before that happens.

Suits first-time buyers and anyone expecting rates to rise.

Variable Rate Mortgages

Standard Variable Rate (SVR) Mortgages

Set by the lender rather than tracking the Bank of England base rate directly, though base rate changes are usually the main driver. The lender can change it as often as monthly, which makes budgeting harder. In exchange, SVRs typically offer more flexibility, with no early repayment charges for overpaying or leaving. This is the default rate you move onto once a fixed, tracker or discount deal ends. See our guide on mortgage interest rates for how these compare, and our remortgage guide if you'd rather move to a new deal before this happens.

Suits those wanting flexibility or who expect to move soon.

Tracker Mortgages

Your rate directly tracks the Bank of England base rate plus a fixed margin set by the lender. For example, a base rate of 4% plus a 2% margin gives a rate of 6%. As the base rate moves, so does your rate, in both directions. Trackers can run for an introductory period or for the whole term (“lifetime” trackers), and some include a rate floor below which it won't fall. Most revert to the lender's SVR once any introductory period ends. Our guide on whether to leave a tracker mortgage covers how to weigh this up.

Suits those expecting base rate falls who can comfortably absorb a rise if they're wrong.

Discount Mortgages

You pay a fixed discount off the lender's SVR, and the discount applies however the SVR itself moves. For example, an SVR of 4.5% with a 1.5% discount gives you 3%; if the SVR then falls to 4%, your rate falls to 2.5%. Many discount deals are “stepped,” with a larger discount for part of the term and a smaller one later, and some are capped. Most are introductory-only, reverting to the SVR afterwards. Our guide on discounted mortgages explains the mechanics in more depth.

Suits those wanting a lower initial rate who can handle the SVR moving upward.

Capped-Rate Mortgages

A variable deal, whether SVR or tracker, with a ceiling your rate cannot exceed, giving a worst-case limit on your repayments. Many also include a “collar,” a floor below which the rate won't fall even if the underlying rate drops further. Capped-rate deals are relatively rare in the current market. The benefit is protection from sharp rises; the drawback is that you may not benefit fully from a falling-rate environment.

Suits borrowers who want protection against increases and are willing to give up some benefit from falls.

What Are the Other Types of Mortgage?

Beyond the core repayment and rate-type choices, several specialist products serve specific circumstances.

Offset Mortgages

Your savings are linked to your mortgage account, and the balance is deducted from your outstanding loan before interest is calculated. For example, £15,000 in linked savings against a £100,000 mortgage means interest is only charged on £85,000. At 3%, that's £2,550 a year in interest rather than £3,000. You can use the saving to reduce your monthly payment or to shorten your mortgage term instead. Your savings earn no separate interest, but the benefit isn't taxed, which particularly helps higher-rate taxpayers.

Suits those with savings they don't need immediate access to, including anyone helping a first-time buyer relative.

95% Mortgages

You borrow 95% of the purchase price with just a 5% deposit. For example, on a £250,000 property that's a £237,500 loan against a £12,500 deposit. Lenders typically charge higher rates on these deals to offset the greater risk of the loan exceeding the property's value if prices fall. Building equity is also slower than with a larger deposit, which can limit your remortgaging options later on. See our dedicated guide on 95% mortgages and our wider deposit guide for how deposit size affects your options generally.

Suits those struggling to save a larger deposit who can afford the higher rate.

Shared Ownership Mortgages

A government-backed scheme where you buy a share of a property, typically 25% to 75%, and pay rent to a housing association or developer on the remainder. “Staircasing” lets you buy further shares over time, potentially up to full ownership. The Help to Buy equity loan scheme stopped accepting new completions by March 2023, but Shared Ownership remains available, alongside the First Homes scheme for eligible first-time buyers. See our Shared Ownership guide for the full detail.

Suits buyers who can't afford a full mortgage on a property outright, especially first-time buyers.

Flexible Mortgages

Built around features like overpayments (sometimes capped, for example at 10% of the balance per year), underpayments subject to lender approval, payment breaks (interest keeps accruing, so later payments can rise), borrowing back funds you've previously overpaid, and daily interest calculation. Rates are often a little higher than standard deals to pay for this flexibility. See our flexible mortgages guide for more.

Suits buyers who want flexibility, or who plan to overpay regularly.

Buy-to-Let Mortgages

For landlords buying a property to rent out rather than live in. Lenders assess the property's likely rental income against the mortgage payment, commonly requiring rent of around 125% of the monthly repayment for basic-rate taxpayers, rising to roughly 145% for higher-rate taxpayers, since HMRC treats mortgage interest relief differently for each. Deposits are usually 20% to 40%, and both fees and rates tend to be higher than on residential deals. Interest-only is common on buy-to-let, though repayment options exist too. Good credit and income are usually still required, and most lenders won't accept first-time buyers for this product. See our buy-to-let guide and our page on interest-only buy-to-let mortgages specifically.

Let-to-Buy Mortgages

For homeowners who want to rent out their current home and buy a new one to live in. You can often release equity from your existing home to help fund the deposit on the new one, and your existing mortgage is usually converted onto a buy-to-let basis. The lender assesses the projected rental income on the old property. You'll need to budget for the costs of both properties, including the higher rate of stamp duty and tax on second homes.

Suits those moving home while keeping their existing property as a rental.

Joint Mortgages

Two or more people take out a mortgage together, sharing responsibility for repayments and agreeing their own split of equity. Combined incomes can increase how much you can borrow, and pooled savings can boost your deposit. Joint mortgages are available across most of the mortgage types on this page.

Suits couples, friends, family members or business partners buying together.

Guarantor Mortgages

A family member or close friend guarantees your repayments if you miss them, without being named on the property deeds. Their own home or a savings lump sum is often used as security. Some lenders accept any guarantor; others restrict this to close family. The guarantor usually needs their own property or equity, sufficient income, a good credit record, and independent legal advice confirming they understand the commitment. This route can sometimes enable a 100% mortgage or higher borrowing based on the guarantor's income. See our guarantor mortgages guide for the full detail.

Suits buyers who need extra support to qualify or to borrow enough.

Joint Borrower Sole Proprietor (JBSP) Mortgages

A family member joins the mortgage application to strengthen affordability and is equally responsible for repayments from day one, but only the main applicant appears on the title deeds as the sole legal owner. Fewer lenders offer this than standard joint mortgages, and it represents a significant financial commitment for the supporting applicant, who gains no ownership stake. Our joint borrower sole proprietor guide covers eligibility and how it differs from a standard joint mortgage or guarantor arrangement.

Suits buyers who need help with affordability but want to remain the sole owner.

Green Mortgages

Reward energy-efficient properties, usually based on EPC rating, through a lower rate, cashback, or extra borrowing. Some lenders also reward planned improvements such as insulation, double glazing or renewable energy installations rather than just the current rating.

Suits owners of already energy-efficient homes, or those planning efficiency upgrades.

Choosing the Right Mortgage Type for You

No single mortgage type suits everyone. The right choice depends on your appetite for rate risk, how long you plan to stay put, your deposit, and your wider finances, so speaking to an adviser who can weigh these factors against your specific situation is the most reliable way to land on the right type.

Talk to one of our team, or use our mortgage calculators to compare your options side by side. Call us on 0191 580 9890 or message us on WhatsApp to get started.

The above blog has information contained within which was correct at the time of publication but is subject to change.