For those new to the housing market, understanding the different types of mortgages available can be difficult. At Expedite Finance, we have the experience and knowledge to help you through the minefield that is the mortgage market whether you are new to the game or if you are already a homeowner. We’re confident that we can find the right product best suited to you.
The first thing you need to do is decide which type of mortgage best suits your personal situation: put simply, there are two basic types of mortgage – variable and fixed rate – with some variations on the themes. Let’s have a look in more detail at variable and tracker mortgages, what the benefits of each can be, and whether this is the right type of mortgage for you. If you’re looking for more information on fixed rate mortgages, click here.
Types of Variable Rate Mortgage
All mortgages come with interest repayments attached, but the rate itself and how it works, depends upon the actual type of mortgage you choose to enter into. A standard variable rate (SVR) mortgage is the most basic type of mortgage and one of the most popular. Your lender sets a baseline rate that may rise or fall according to fluctuations in the market, and your monthly interest repayments will vary in line with that rate.
A tracker mortgage is a variation of this theme: the Bank of England sets a base interest rate for lenders on a regular basis, and it is this rate that a tracker follows, unlike the standard variable rate version which is determined by the lender.
These two types of mortgage have many positive features as well as negatives. In short, the advantage is that you follow the base interest rate at all times. With a fixed rate mortgage you pay the same rate all the time, so if the base rate falls below the agreed interest repayment rate you will be paying more than you should be. A variable rate mortgage may also be cheaper to set up than a fixed rate – thanks to the lesser risk the lender is exposed to – and unlike other types of mortgage, may not be subject to an early repayment charge. This means that, should you be lucky enough to enjoy a windfall, you can pay your loan in full at any time without penalty.
It should be remembered, however, that with a standard variable rate mortgage it is the lender who sets the interest rate, and they are liable to be able to change it whenever they wish. This is an important consideration. You will also be unsure of whether your payment one month will be the same as the next, so it can be unpredictable.
There is one further type of variable rate mortgage that needs a quick mention, although it is becoming increasingly rare: this is the capped rate mortgage, whereby the interest rate may vary, but not beyond a certain level. Thanks to the recent years of uncertainty in the financial world, lenders are wary of entering into such a deal.
Whether a variable rate mortgage or a tracker is right for you depends on your personal situation, and that’s why we at Expedite Finance are sure we can help you find the best deal. Our team have access to lenders and deals which may not be available to you directly and we’ll carefully search the market for the right mortgage products suited to your personal circumstances. If you have any questions or need advice on the type of mortgage that is best for you, contact Expedite Finance on 0800 2012 148 and one of our friendly team will be more than happy to help.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE