As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
There are a number of mortgage types that you can consider. Below, you can read about the various mortgage types and make an informed decision as to which one may be right for you. The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK
1. Fixed rate mortgages
How much will my payments be? – Your payments will be in of an equal, fixed amount for the entire length of the deal which makes it easy to manage your savings.
What if bank rates change? – No matter what happens to the base rate, your payments will remain the same.
How long will it take? – More often than not, the fixed part of your mortgage lasts two or more years.
Additional information: In most cases, your payments will automatically revert to the lenders standard variable rate at the end of the fixed part of your mortgage. During this time you may want to switch deals or leave your current one to avoid any financial penalties. It is important to bare in mind that, when compared with variable mortgages, that fixed rate mortgages tend to have higher interest rates.
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2. Variable rate mortgages
How much will my payments be? – Variable rate mortgages, as their name suggests, have payment amounts that vary. The interest that you will pay on your mortgage loan is susceptible to changing at any time.
How long will it take? – As there are many different types of Variable rate mortgages, such as – An Offset rate, a Tracker rate, a Discounted rate, or a Capped rate. The time is not the same for all options and will depend on your choice.
Do I need to have savings in place? – You will need to have savings in order to protect yourself if the interest rates change.
Additional information: If you are in a contract that is offering you a discounted or capped deal, you could face an additional payment if you decide to leave. If however you are not in a discounted or capped deal, you will have the ability to make over-payments or leave the deal as and when you wish without facing a penalty.
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3. Discount mortgages
How much will my payments be? – For the first 2 years of the mortgage, you will be offered a discount off of the lender’s standard variable rate which is called SVR. This discount will be a percentage that is decided by the lending company. The payments that you make will be higher towards the end of the mortgage term.
What if I decide to leave the deal? – If you leave before the end of the discounted period then you may be charged extra.
Additional information: SVR is decided by the bank and can therefore change at any time, it does not act in line with the Bank of England Base Rate. This means that you may end up paying more, or less, than you had anticipated.
4. Tracker Mortgages
What is a Tracker Mortgage? – A Tracker Mortgage is a mortgage that moves in line with the Bank of England Base Rate instead of the banks own standard variable rate (SVR).
How are they calculated? – Tracker deals are calculated using the base rate with the addition of a set percentage of interest that can go up and down.
Additional Information: Typically, Tracker mortgages are between 2 and 5 years before the rate moves to the lenders own SVR. Some lenders may offer tracker deals for the entire life of your mortgage. You will need to check the small print of any deal that is recommended by our advisors. Features of the Tracker Mortgage include; when the Base Rate falls, your mortgage repayments will fall, and when the Base Rate increases, your mortgage repayments increase. You may have to pay an Early Redemption Fee should you leave the deal before the introductory period is over.