There are lots of different types of mortgage. Some of the main ones are standard mortgages, flexible mortgages, current account mortgages, offset and all in one mortgages

For details of other mortgages, visit our other types of mortgage section.

Standard mortgages
These are the mortgages most of us still have. These mortgages can be repayment or interest only and you just make one payment a month to them.

• With repayment mortgages, your payments repay both the interest owed, plus a small amount of the capital (the amount you have borrowed) until the mortgage is paid off in full.
• With an interest-only mortgage, your payments cover the interest on the mortgage, but not the capital (the amount you originally borrowed). So at the end of the mortgage term, the amount of the original mortgage must be repaid. To make sure you can make this final payment, you put extra funds in investments.

Key pros and cons of standard mortgages Simpler to understand than some other types of mortgages.

Pros

• These may offer a lower interest rate initially than some mortgages which have extra features, like overpayment and underpayment.
• Useful if you like having your mortgage separate from other borrowings and savings you have.

Cons

• You usually can't make extra payments, so you can't use a bonus or lump sum to pay off part of your mortgage.
• As you can't make overpayments, or pay in lump sums over the longer term, these mortgages can be more expensive than some other types.
• Once any low introductory rate ends you will have to pay the standard variable rate, which is usually one of the most expensive interest rates.

Flexible mortgages
These repayment mortgages allow you to vary your monthly repayments. Depending on the mortgage, you can:

• Make bigger or smaller payments each month.
• Make a lump sum payment.
• Take a break from payments altogether.

You can usually do any of these without being charged a penalty fee, as long as you do not exceed a pre-agreed borrowing limit.

Key pros and cons of flexible mortgages

• If your earnings change each month, you can vary your repayments. If you inherit some money, you can pay off a lump sum, or if you want to stop repayments for a while, you can often do that too.

• By making slightly bigger monthly payments, you can repay your mortgage more quickly and save thousands of pounds in interest over the mortgage term.
• You can often borrow more - perhaps for some home improvements - up to your limit. This lets you borrow at the mortgage rate, rather than taking out a loan which is often at a higher interest rate.

Cons

• You may not want to make bigger or smaller payments each month. The flexibility is part of the deal, so if you don't need it, you may find you can get a lower interest rate elsewhere.

Current account mortgages, offset and all in one mortgages

Current account mortgages combine a mortgage and a current (banking & cheque) account. These are good if you like the option of making overpayments on your mortgage (e.g. if you are self-employed or receive bonus payments). The other advantage is that interest is calculated on a daily basis, so when you pay money into your account, like your monthly wage, the overall loan size is lowered, so reducing the total amount of interest paid.

It's easiest to think of a current account mortgage as a very large overdraft. When you have your salary paid into your account each month, the overdraft is reduced and therefore so is the interest owed. Even when you take out money from your account over the month, because the total overdraft has been temporarily reduced, the interest that builds up is lower and the time to pay off your mortgage is reduced.

Offset and all-in-one mortgages, like current account mortgages allow you to offset the balance of your mortgage and other borrowings you have, like loans and credit cards, against any money you have in a savings and/or current account that's held with the same lender. All-in-one accounts are similar to current account mortgages, but instead of having separate accounts for your savings and borrowings, your money may be combined in one single account.

Key pros and cons of current, offset and all in one mortgages

Pros

• All of your money works for you. As soon as your salary and other money is paid into your account it starts to reduce the amount you owe on your mortgage.
• Interest is calculated daily, so any payments into your account work to reduce the interest you have to pay straight away.
• If you pay in more than you take out, you may be able to repay your mortgage more quickly than with other types of mortgage, and you could save thousands of pounds in interest.
• It could be a cheaper way to borrow for some people.

Cons

• These mortgages can be difficult to understand as they are quite complex.
• You need to be disciplined to make sure you keep on track with your mortgage payments.
• With some types of mortgage you have your mortgage and bank account together, so every time you get a balance you'll be overdrawn - until your mortgage is paid off. Some people may find this depressing!