Types of Mortgage Rates
Each lender offers a range of schemes ensuring there is something available for everyone’s needs. Below are the common types of mortgage rates:
Fixed Rate Mortgages
With a fixed rate you have the peace of mind knowing that whatever happens to interest rates, your monthly payment will not change whilst in the chosen term. Fixed rates can be offered for various periods from 1 year to 10 years.
Capped Rate Mortgages
Not as popular in current markets but with the capped deals the interest rate moves up and down with changes in the market but will never exceed a specified top level, i.e. ‘The Cap’.
Discount Rate Mortgages
Discount rate mortgages give you a certain percentage of the lender’s variable rate for a given period.
Offset Mortgages
Lenders will offer you schemes whereby your mortgage, savings and current account are held together in ‘One Basket’. The mortgage interest is applied to the total balance on a day-to-day basis so the more savings you have the lower amount of interest is charged thus reducing the number of years you repay your mortgage.
Cashback Mortgages
These are usually linked to a lender’s standard variable rate and provide a cashback on completion of the mortgage equivalent to a percentage of the mortgage advance. To prevent a borrower receiving the cashback and then moving to another rate the lender will insist on a ‘tie in’ period dependant on the size of payout.
Capital & Interest Repayment Mortgage
This is the most common form of repaying your mortgage. Each month with every payment made to the lender you are paying the interest and part of the capital so at the end of the chosen term the mortgage would have been repaid.
Tracker Rate Mortgages
These track the bank of England base rate so can go up and down when changes are made. Usually the lender will offer the tracker plus a certain percentage, e.g. 0.5% so while you are on the scheme your pay rate will always be 0.5% above the base rate. Again the deal will be over a specified term.
Interest Only Mortgages
Each month the interest on the mortgage is paid to the lender with the balance remaining unaltered. This will remain for as long as the mortgage remains or until it is paid off, for example through the sale of the property.
Mortgage Advice
As with all financial agreements an individual’s credit history dictates which lender will be happy to assist with a mortgage and the amount they are willing to lend. If you are unsure of your history you can obtain for a small cost a copy of your credit file from such companies as Experian or Equifax.
Outstanding credit commitments such as loans, HP and credit card balances are taken into account when a lender calculates the amount they are willing to lend so be prepared to have this information to hand when you start the mortgage process. With lenders offering different affordability calculations these commitments can determine who we would approach on your behalf.
Outstanding credit commitments such as loans, HP and credit card balances are taken into account when a lender calculates the amount they are willing to lend so be prepared to have this information to hand when you start the mortgage process. With lenders offering different affordability calculations these commitments can determine who we would approach on your behalf.