The days when you took out a bog-standard mortgage and stuck with the same lender until it was paid off are long gone.

Like so much else in life, the mortgage market has become fiercely competitive and incredibly confusing to the uninitiated.

But that is not bad news.

As competition heats up prices have come down. And with more choice, the chances of finding a mortgage that suits your lifestyle and budget is better than ever.

Before you go looking for good deal, it will pay to scrub up on some mortgage basics.

What is a mortgage?

A mortgage is a loan that is guaranteed by a property.

At its most simple that means, if you can't pay back your loan the lender can force you to sell your home so they can get their money back.

The loan rate is set by the lender, and is called the standard variable rate (SVR). There will be more about interest rates later.

Typically you can borrow three to three and a half times your income, or two and a half to three times the joint income of you and your partner. These are known as income multiples.

The amount you can borrow will also depend on the value of your home. Most lenders will allow you to borrow up to 95% of the value of a property.

What type of mortgages are there?

There are two basic species of mortgage, interest-only and repayment.

The option you choose is determined by the way you want to repay your loan.

Interest only

An interest-only mortgage allows you to repay just the interest on your loan, but you have to take out an investment that will mature to pay off the outstanding amount.

If your investment performs well then you may have some money left over after paying back your mortgage.

But there is also a risk that the investment will under perform leaving you to make up any shortfall.

The most popular investment for these kinds of mortgages used to be an endowment, but they have been hit by problems recently. Many people have found that poor returns on the stock market mean their endowments might not provide enough money to pay off the whole mortgage.

Now only about six per cent of new interest only mortgages are backed by endowments. Other investments include Isas and pension plans.

Repayment

A repayment mortgage requires you to pay back both interest and loan capital, so at the end of your mortgage period there is no money owing.

Early on you pay mostly interest, so it might seem that the outstanding balance never gets lower. But later on you will repay more capital, and the total will decrease more quickly.

Repayment mortgage's are generally considered to be less risky because there can be no nasty surprises.

There is no hard and fast rule about which is better. It is a matter of individual preference.

Whichever species (or type) of mortgage you choose, you will still have to decide what sort of mortgage you want.

"But wait", you say, "didn't I just do that."

No, you decided how you would repay it, now you have to decide what sort of mortgage you want.

And there are lots of them.

Discount mortgages

This is where lenders offer a reduction on the standard variable rate for a fixed period.

It could be something like 1.5% below SVR for two years. After the discount period ends, your mortgage rate reverts to the SVR.

This type of mortgage is good for someone wanting to make savings in the early days of owning a property.

But be aware that the rate can change as it is fixed to the SVR.

Fixed mortgages

A sensible option for people who want to know exactly what they will be paying for a certain period.

With a fixed rate, your payments stay the same no matter what happens to the base rate.

There is always a risk that, if interest rates fall, you might be left paying an uncompetitive rate. On the other hand, a rise in rates will leave you paying less than people on other schemes.

These deals are good for those who want to be able to budget over a long period.

Tracker mortgages

This is a fairly new type of mortgage which follows the Bank of England base rate.

It will usually stay a set margin above the base rate for the duration of the loan - generally about 1% - although some products will offer an initial discount.

Tracker rates tend to be cheap compared to more traditional SVRs, but not as cheap as shorter term discounts offered by some mortgages.

They are suitable for people who think base rates might be on a downward trend.

They are also useful for those unsure whether lenders will always pass on interest rate cuts to their customers.

Capped mortgages

These schemes are similar to fixed rate mortgages, but give you a get-out if rates fall sharply.

They allow you to pay either the capped rate or the lender's SVR, whichever is lower.

They can initially be slightly more expensive than other deals, but if rates fall they can pay off.

So there you have the basic types and sorts of mortgages.

And there is still more. Because it's not just about how you repay your mortgage, nor how much you pay each month, but also how your account is managed.

This has been an area which has seen big developments in recent years.

Offset mortgages

These are a fairly new product which link your current account and your mortgage.

You pay your salary into an account and your mortgage payment is taken out as per usual.

But any extra cash in the account is also used to offset against the amount you owe on the mortgage, so you pay less interest.

For example, if you have a mortgage of �50,000 but have �5,000 in your account, you will pay interest only on �45,000.

Any money you can pay off early will save on interest payments.

The lenders do this without physically moving your money so there is no change to the way you manage your current account, savings or mortgage.

Flexible mortgages

Another new, and increasingly popular, way of managing your mortgage is through a flexible arrangement.

This allows you to pay more money off your mortgage when you have it, or take a payment holiday if things are a bit tight.

Some lenders will allow you to overpay each month and withdraw the extra cash if you need it later.

And if you have the money, you can pay off your mortgage early.

Any money you can pay off early will save you interest payments.

Mortgage choices interest only or repayment discount fixed tracker capped offset flexible

Rates on these accounts can be a bit higher than you'll find elsewhere, but they can be useful for people whose income fluctuates.

Those are the basic products and repayment methods you will have to bear in mind. But that's still not all.

There are plenty of other things to be aware of. Here are some other tips to take into account:

Penalties

As ever, read the small print.

Getting a hefty two-year discount might seem attractive, but you could find you are locked into a high SVR after the discount period finished.

Some lenders will insist that once your initial offer period ends, you stay with them on their variable rate for anything up to five years.

This is particularly important if you have received a cash back deal. You could be given up to �3,000 in cash for signing with a lender, but made to repay it if you move to another lender within a certain period.

Mortgage indemnity guarantee (Mig)

If you have only a small deposit to put down, you might have to pay Mig insurance.

This is to cover the lender in case your home is repossessed and sold for less than the value of the mortgage.

Many lenders will charge Mig on loans where the deposit is less than 10% of the purchase price.

You could find this will cost as much as 1.5% of the mortgage. It could be cheaper to find a loan that has a lower headline rate but does not require Mig.

Buy-to-let

A growing number of people are taking out second or third mortgages to buy properties to let out.

Traditionally these mortgages have been more expensive - about 1% higher - but there are now exactly the same discounts and deals on offer as for first homeowners.

Remortgaging

There is no longer any reason to stay with one lender for the duration of your loan.

Lenders are falling over themselves for your business, and people are increasingly ready to chop and change every few years in search of the best deal.

Take advice on what offers are available - there could be big savings to be had.

And if you are paying the standard variable rate with your lender, why not ask them what they can do to persuade you to stay with them!

Interest calculation

Make sure you know how the interest on your account is calculated - it could be daily, monthly or even annually.

This is important if you might want to pay lump sums off your mortgage.

Daily calculation means you benefit straight away; annual calculation means you may have to wait for your deposit to have any effect.

In this case your money could be doing more for you invested elsewhere.

Advice, advice, advice

Yes, there's plenty to think about.

The best way to deal with it is to decide what's important to you.

Do you like certainties? In which case, a fixed rate repayment mortgage might suit you.

Or are you willing to take a bit of a risk? If so you might consider an interest-only discount mortgage.

Is a lock-in sensible if you might be moving within a few years?

And while a big discount is attractive, will you be able to meet the higher payments when it ends?

Mortgages are not regulated by the government like investments and pensions, so be careful about who you ask.

There is a code of conduct from the Council of Mortgage Lenders which good brokers should adhere to.