|
 Mortgage
Types 
There are currently thousand's of mortgage
products available in the UK and finding the right one for you can be
a bit of a minefield. Being a completely independent mortgage specialist,
RemortgagesandMortgages.Com have access to products from the whole marketplace,
including many exclusive deals which cannot be obtained directly from
the lenders. Why not use our Mortgage Quote facility to see what we could
do for you.
Below is a brief description of the more
common mortgage types to enable you to make a decision as to which mortgage
would suit you best.
Variable
Rate Mortgages
The interest rate changes when the lender changes their lending rate.
Variable rate mortgages are often recalculated annually. This means that
any changes to mortgage interest rates are not reflected in your monthly
repayments until the lender's recalculation date. Variable rate mortgages
can be the lender's Standard Variable Rate or some other variable rate
determined by the lender according to the particular product. A variable
rate mortgage allows you to take advantage of any falls in interest rates,
but any saving here must be balanced against the risk of future interest
rate rises.
Fixed
Rate Mortgages
The interest rate is fixed for a specific period, which can be from a
few months to the full mortgage term. Repayments are not affected by fluctuations
in the prevailing variable rate, so if the variable rate drops below the
fixed rate your repayments will remain the same. This type of mortgage
gives you the security of knowing exactly what your repayments will be
for the term of the deal. After the deal term the interest rate will normally
revert to the lender's Standard Variable Rate. There may be financial
penalties if you decide to change your mortgage during the fixed rate
period or even for a while after the scheme has ended.
Discounted
Rate Mortgages
The lender gives a percentage discount from their Standard Variable Rate
for a length of time, which can be from a few months to the full mortgage
term. This type of interest rate is normally offered to first time buyers
or people with high levels of equity. Generally, borrowers with a larger
deposit will be offered a greater discount. Discounts can help soften
the financial blow of moving house, but mean that after the discount period
ends, repayments will rise sharply. Your repayments will fluctuate with
interest rate changes but will remain at the set level below the prevailing
rate for the deal term. There may be financial penalties if you decide
to change your mortgage during the discount period or even for a while
after the scheme has ended.
Stepped
Rate Mortgages
Stepped Rate mortgages come in various forms. They can be discounted for
a number of years, with the discount rate reducing during the scheme period,
or even short-term fixed rates followed by a discounted period. Some schemes
even offer a combination with a cashback to help with moving costs. Many
schemes are only available on an exclusive basis, so if you are interested
in this type of deal, contact RemortgagesandMortgages.Com for the latest
'Best Buys'.
Capped
Rate Mortgages
The maximum rate of interest you pay is fixed for a certain period of
time. If the interest rate rises above the set capped rate, your repayments
will remain at the capped level. If they drop below the capped rate, your
repayments will also fall in line with the lower interest rate. This type
of interest rate gives a level of security should the base rate rise but
also takes advantage of lower interest rates should they fall. After the
deal term the interest rate will normally revert to the lender's standard
variable rate. There may be financial penalties if you decide to change
your mortgage during the capped rate period or even for a while after
the scheme has ended.
Cashback
Mortgages
With a Cashback mortgage, the lender can offer a single cash payment once
the purchase or remortgage is completed. This can amount to several thousands
of pounds, which can be used to help towards moving costs, to pay for
home improvements or buy new furniture. Cashbacks can also be staged over
a number of years or even combined with discounted or fixed rate mortgages.
The lender will normally require you to pay back the cashback if you decide
to move your mortgage within an agreed period of time.
Base
Rate Tracker Mortgages
The newest type of mortgage. The interest rate is variable but set at
a premium (above) the Bank of England Base Rate for a period or even the
term of the mortgage. The interest rate fluctuates with bank base rate
fluctuations and usually change immediately following a bank base rate
change. The biggest advantage of this type of mortgage is that, usually
there is little or no redemption penalty. This also means that interest
can be saved on the mortgage without penalty, by overpayments, and these
savings can be quite significant.
Flexible
Mortgages
This type of mortgage is relatively new. The interest rate can be discounted,
fixed, capped or variable, but has the big advantage that it is calculated
daily or monthly instead of annually. This means that any capital repayment
of the loan will affect the interest charged on the outstanding balance
immediately. By making regular overpayments, the interest saved on the
mortgage over the term can be quite significant. Also, most lenders will
allow funds to be drawn from the account up to the original mortgage balance
or even allow payment holidays.
Current
Account Mortgages
A current account mortgage is a combination of a flexible mortgage and
a current account. The lender sets a maximum borrowing limit on the account,
which includes the balance of the mortgage. As long as the borrower remains
on course to repay the mortgage before they retire, they can increase
their borrowings by withdrawing money from the current account. A cheque
book is issued to facilitate this and money can be withdrawn for any purpose
provided the maximum limit is not exceeded.
Lenders normally require borrowers to pay
their salary into the current account each month and calculate interest
on a daily basis. Any money paid into the account is set against the mortgage
and any which is left over at the end of the month reduces the outstanding
balance on the account. Providing the outstanding balance is reduced regularly,
this would have the same effect as making an overpayment on an ordinary
flexible mortgage, therefore potentially saving thousands of pounds over
the life of the mortgage.
Get
your free mortgage quote! |
Request
a callback