Types of mortgage

Types of mortgage

Like all interest rates, mortgage rates can go up as well as down, and each change will make your monthly mortgage repayments fluctuate. Most lenders instead of charging interest at the Standard Variable Rate (SVR) may offer various options to help you stay in control.

Standard Variable Rate Mortgage

Monthly mortgage repayments can go up and down in accordance with changes in the Lenders interest rate. Mortgage interest rates tend to move in line with the base rate set by The Bank of England.

Base Rate Tracker Mortgage

Similar to the Standard Variable Rate Mortgage, the rate is set as a percentage above or below The Bank of England Base Rate. The rate you pay could change if the base rate changes.

Fixed Rate Mortgage

With this type of mortgage your interest rate is fixed for a stated period. This can be extremely useful for budgeting as your monthly mortgage payments are effectively ‘frozen’ for the fixed rate period. Please remember that fixed rate loans often have early repayment charges attached to them if the mortgage is repaid during or even after the fixed rate period. You should also note that if interest rates fall below your fixed rate during the fixed period, you would continue to pay the higher monthly payments. Please note that at the end of the benefit period the interest rate charged could change to a higher rate than you currently pay.

Discounted Rate Mortgage

With this type of mortgage the lender will offer a discount off their standard variable rate for a stated period. This is a good method of keeping monthly repayments down during the initial years of your mortgage. With a discounted rate mortgage there may be early repayment charges if the mortgage is repaid early. Please note that the discount is for a limited period only. The lenders standard variable rate on which the discount is based may rise or fall and allowances should be made for this in future budgeting. Please note that at the end of the benefit period the interest rate charged could change to a higher rate than you currently pay.

Capped Rate Mortgage

With a capped rate mortgage although monthly repayments may fluctuate the interest rate will not exceed an agreed limit. Once this limit has been reached, if mortgage interest rates increase your repayments will remain static. If mortgage interest rates fall so will your repayments. A variation to this mortgage is to include a ‘collar’, an agreed rate below which your mortgage interest rate cannot fall. Please note that at the end of the benefit period the interest rate charged could change to a higher rate than you currently pay. There may be an early repayment charge if the mortgage is redeemed early.

Cashback Mortgage

The lender will offer a cash incentive to new borrowers. In some cases this sum can be quite large and can be used in any way you wish e.g. new carpets, new kitchen, etc. etc. Although care should be taken to ensure that you are aware when the cashback will be made, upon completion or a set period after? Should you repay a cashback mortgage before the stated benefit period, you may have to repay some or all of the cashback amount.

We are not a bank or adviser. The information collected is not an application for credit or a mortgage loan.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Finance Planning Group Limited do not usually charge a fee but depending on your circumstances a fee of up to 1.5% of the mortgage amount may be charged.

There may be an early repayment charge if the mortgage is redeemed early.

My Shortlist

Empty