For most of us, buying our home is the biggest financial decision we ever make. The good news is that you'll find plenty of help available, although you need to be clear what sort of help you're being offered. Take care to shop around and ensure that you are getting the sort of help you need.

A mortgage is a loan you take out to buy property. Most banks and building societies offer mortgages, as well as specialist mortgage lending companies. If you change lenders but don't move home it's referred to as a 'remortgage'.

Choosing a Mortgage - Where to start from

You can get a mortgage direct from the lender ( banks, building societies and specialist mortgage lenders), or you can use a mortgage broker.  You can buy based on "information" only or get advice and recommendation on a mortgage that suits your particular needs.

Tpes of Mortgage

Repayment mortgages

Every month, your payments to the lender go towards reducing the amount you owe as well as paying the interest they charge. So each month you're paying off a small part of your mortgage.

The pros: It's a simple, clear approach - you can see your loan getting smaller.

The cons: In the early years your payments will be mainly interest, so if you want to repay the mortgage or move house in the early years, you'll find that the amount you owe won't have gone down by very much.

Interest-only mortgages

As the name suggests, your monthly payment only pays the interest charges on your loan - you're not actually reducing the loan itself. This is why it's very important you arrange some other way to repay the loan at the end of the term; for example, through an investment or savings plan.

If you choose this option you will need to check that your investment or savings plan grows accordingly, so that at the end of the term you'll have enough money to pay off the loan. If it doesn't grow as planned, you will have a shortfall and you'll need to think about ways of making this up.

The pros: Because you're only paying off the interest, and not the loan itself, your monthly payments will be lower.

The cons: That debt is not going to go away. Throughout the life of the mortgage, you'll need to check your investment or savings plan is on track to repay your loan at the end of the term. If you can't repay it at the end of the term you could lose your home.

Repayment methods

The two main ways to repay your mortgage are 'repayment' and 'interest only'. With a repayment mortgage, you make monthly repayments for an agreed period (the 'term') until you've paid back the loan and the interest.

With a repayment mortgage, your monthly payments gradually pay off the amount you borrowed (the capital) as well as the interest over a set period (the term).

But with an endowment mortgage, your monthly payments only cover the interest on the loan. They do not pay off any of the capital. At the end of the term, you need to pay off the capital using the money from your endowment policy.

An endowment policy is an investment plan that you usually pay into each month. Your money is invested – for example in shares or bonds – with the aim of making it grow enough to pay off the original loan when the mortgage term ends. 

However, as investments can vary in value, there is usually no guarantee that the policy will pay out enough to repay the mortgage at the end of the term.

Flexible Features

Some mortgages offer you options to vary your monthly payments, or to combine your mortgage account with savings and other income - these are called flexible, current account and 'offset' mortgages.

Insurance

A lender may require you to take out life insurance to pay off your mortgage should you die.  You can also get insurance to protect your income or just your mortgage payments if you become ill or disabled, or lose your job.