You may find navigating through mortgage options confusing. That’s where we come in. We are experts at establishing what is important for you in your mortgage, not only now but in the future, and will discuss all the options with you, and recommend the right deal that suits your needs going forward.
Below are a few mortgage types and a brief explanation of what they do.
A popular deal in the marketplace. Your payments are fixed for a set period of time. Typically either 2, 3 or 5 years, although longer terms can be found from specialist lenders.
Whilst you will know your monthly payment will not change, you would not benefit from any rate drops, and are likely to be tied in to the deal with an early repayment charge should you wish to end the mortgage early either by settling it, or moving to another lender.
A base rate tracker will follow the Bank of England base rate at a specified amount above or below set for a period of time. Therefore the rate can change in line with the base rate changes, meaning repayment amounts can rise and fall. Typically, you will be tied in with an early repayment charge for shorter term trackers, whilst it is less common for lifetime tracker deals to have an early repayment charge. They are a form of variable rate mortgage, and set typically a percentage point above or below the Bank of England base rate. This means your mortgage is not dependent on your lender’s SVR but that set nationally. You are not protected from interest rate rises, as with a fixed rate deal, but you can often take advantage of low interest rates and overpay.
A capped rate is a variable rate that is typically tied to another rate; either the bank of England or the lender’s standard variable rate. The capped rate will be at an amount above or below the reference interest rate. The interest rate can rise or fall, but you know what the maximum interest rate the deal can go to, or the “cap”. These types of deal provide an element of security in that you know your worst case scenario, but mean you can also benefit from rate drops in the market.
An offset deal is typically a variable rate, but can be a fixed for a period of time. A savings account is placed alongside the mortgage, and any money held in the savings account is offset against the mortgage debt and no interest is charged on this amount. No interest is paid on the savings.
As an example: if you had a £100,000 mortgage, and £20,000 in the offset savings account you will only pay interest on £80,000 of your mortgage debt.
For people with large savings pots, these can be beneficial deals to consider.
A discount rate is again a variable rate. It is a true discount from the lender’s standard variable rate or reference rate. Typically the discount will apply for a set period of time, and during this period you will likely be tied in with an early repayment charge. Discount rates can provide a good deal as they are a true discount but if they are tied to a lender’s rate, you could have increased payments based on the internal economics of the lender if they decide to increase their standard variable rate. These typically offer a set period of time for a discount on the lender’s SVR. If a lender’s SVR is 5% you may be offered a 2 year discount of 1%, meaning an interest rate of 4% for 24 months. We can advise you on discount mortgage rates and deals.
Typically this is the rate everything else will revert to. A standard variable rate will typically not have any tie in, and is set by the lenders themselves. Every lender uses their own internal economics to set their own rate, and it can change at short notice.
Most deals nowadays whether they be a fixed rate or a tracker/variable rate will have options to pay a fee for the rate upfront or add it to the mortgage deal or not pay a fee. There can be other incentives such as free valuations and cashback available too.
It is our job to work with you to establish and subsequently recommend which deal best suits your needs.
At the end of the mortgage term the mortgage debt needs to be completely paid back. A capital repayment mortgage guarantees this, as every month you pay off a little bit of the debt, and some interest.
With an interest only mortgage you will need to clearly demonstrate to the lender a strategy for repayment at the end of the term and have a suitable repayment vehicle in place that will pay off the mortgage. As investment performance is never guaranteed, the repayment of your mortgage is also never guaranteed, and you need to be fully aware of that possibility, if you opt for an interest only mortgage.
Our team are on hand to give you a call to discuss your needs and source a mortgage that works for you. Simply fill in the form and we’ll be in touch!
There may be a fee for arranging a mortgage and the precise amount will depend on your circumstances. This will typically be £495 payable on application.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
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