Fixed Rate Mortgage
A fixed rate mortgage is how it sounds, it is a fixed monthly repayment cost for a fixed amount of time. Fixed Rate Mortgages usually last for up to five years but can last longer.
They can give you the opportunity to budget and know what your monthly outgoings are going to be which can make them a good option for first time buyers. If you know you will be in the property for a long amount of time you can opt for a fixed rate mortgage for peace of mind.
Standard Variable Rate
The Standard Variable Rate (SVR) is the rate at which a lender will set, usually at a level which they offer their products. If you finish a different rate, for example a fixed rate or a discounted rate, you will usually be put onto the lender’s SVR rate.
Variable Rate Mortgage
A variable rate mortgage is a rate which is varied and controlled by the lender. A lender will move their rate up and down as they please and will pick their own SVR.
Tracker Rate Mortgage
A tracker rate mortgage is a variable rate which usually tracks the Bank of England’s base rate. You will not have the guarantee of knowing your monthly repayments unlike a fixed rate mortgage. Mortgage lenders will usually offer for you to have access to the fixed rate too, so if the tracker rate does go up too much, you do have options.
A discounted rate is a rate which has a percentage discount from the Standard Variable Rate. For example, if their SVR is set at 3.6% and you are offered a 1% discount, your pay rate would be 2.6%. Once discounted rates ended, they tend to go back to the SVR rate.
With an offset mortgage you effectively have two accounts, one being your mortgage account and another your savings account. Your cash savings will be used to offset your mortgage balance by reducing the amount of interest you are paying on your mortgage repayments. For example, if you have a £150,000 mortgage alongside £50,000 in savings, you will only be charged on £100,000 for your mortgage because the savings are offsetting.
It is a good option for people who have savings or capital in the bank. It is quite specialised as you can be in control of how much interest you are paying while still accessing your savings.
Capital Repayment Mortgage
This monthly repayment type is made up of two parts, you are paying off your mortgage balance and paying off the interest too. This is the most traditional type of mortgage repayment nowadays.
The advantage of Capital Repayment is that if you keep up with your repayments then by the end of the mortgage term, you will own the property outright. It is a better option for someone who wants to ensure they own the property by the end of the mortgage.
Interest Only Mortgage/Repayment
Interest only repayment is when you only pay off the interest rate of the loan each month rather than any off of the loan’s value. This means that your month payment will be lower yet the whole of the loan will be due at the end of the term.
Investment properties tend to be on an interest-only basis because they are bought with the intention of selling or just using it for income purposes. When it comes to residential properties you will need to be on a certain income and fit certain criteria to obtain this repayment type and it is not common.
Flexible mortgages offer flexibility within the mortgage terms. This can vary from the lender letting you make early repayments without an early repayment charge or allowing you to take holiday breaks. Some lenders will also offer for you to pay more and less at certain times during your mortgage term. This is a good option for someone who has a bit of capital in their bank and can afford to not have a set repayment each month.
Lenders will sometimes offer cash as an incentive to take a mortgage application out with them. This can be advantageous to help cover the costs of obtaining your new mortgage or your arrangement fees.
How Can a Mortgage Broker Help?
An initial consultation with a mortgage broker is free where they will talk through all of your priorities and needs. They will look into your finances and what capital you already have and work out which mortgage product will suit you best.
They will talk you through what kind of payments you want to be making each month and explore what type of mortgage will be right for you. Mortgage brokers will look at the whole of the mortgage market and find the right option for you to give you the stability you are wanting.
Mortgage brokers take you through all of the documentation too and are authorised and regulated by the financial conduct authority meaning they are qualified to be giving advice and aiding with legal documentation.
If certain things are more important to you, for example if overpaying is important to you mortgage brokers can conversate with lenders to find the right mortgage for you. Mortgage advisers will have built relationships with lenders too meaning they can access exclusive deals that banks will not be able to offer, and you won’t find anywhere else.
We have a great team of advisers who are eager to give you the best possible advice and help you onto the property ladder. We can offer you the one to one support that will help take the stress out of the search and speed the process up to get you into that dream home.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
We may charge a fee of up to £395 for mortgage advisory services and administration