Types of Mortgages
Prior to delving into the specifics of the mortgage that best suits your needs, the initial consideration should revolve around how you intend to repay both the borrowed capital and the associated interest.
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We will explain the different repayment options to you
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Fixed Rate Mortgages
When it comes to fixed-rate mortgages, things are pretty straightforward and comforting. With this type of mortgage, you'll enjoy a set interest rate for a specific period, and here's the best part: it won't change, no matter what the Bank of England does.
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What does this mean for you? Well, it means you can rest easy knowing exactly what your repayments will be throughout that set period. There's no need to worry about any surprises caused by the Bank of England's rate changes. Whether the rate offered is higher or lower than the lender's standard variable rate, you can have peace of mind and financial stability knowing your repayments are locked in for that period of time.
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So, let's keep it simple and hassle-free with a fixed-rate mortgage that gives you the reassurance you deserve.
Standard Variable Rate (SVR Mortgage)
Standard Variable Rate (SVR) mortgages are set based on the lender's own base rate, which may fluctuate in line with changes to the Bank of England's base rate. With an SVR mortgage, the interest rate can go up or down during the term.
It's important to note that the SVR can apply for the entire duration of the mortgage or until you decide to switch to a new deal. This flexibility allows you to adapt to market conditions and potentially take advantage of lower interest rates in the future.
Discount Mortgages
Discount mortgages provide borrowers with a reduced interest rate compared to the lender's Standard Variable Rate (SVR) for a specific period, typically ranging from 1 to 3 years. It's worth noting that the SVR can vary among different lenders, so the highest discount doesn't necessarily mean it offers the lowest interest rate available.
With a discount mortgage, you can take advantage of the discounted rate during the specified timeframe, allowing for potentially lower monthly repayments.
Tracker Mortgages
Tracker mortgages typically feature an interest rate set a few percentage points above the Bank of England's base rate. This set rate then adjusts in line with any changes to the bank rate.
With a tracker mortgage, you can benefit from the ups and downs of the base rate, potentially leading to lower or higher interest payments. These mortgages typically have a defined time period, usually ranging from 1 to 5 years, during which the tracking of the base rate applies. This provides borrowers with the opportunity to take advantage of favorable interest rate movements during the specified timeframe.
Offset Mortgages
Offset mortgages present a unique concept by connecting the borrower's mortgage to their savings and current accounts.
With this type of mortgage, interest is calculated based on the difference between the outstanding mortgage balance and the funds held in the linked accounts. Essentially, any savings held offset a portion of the mortgage, resulting in reduced interest payments. This arrangement effectively acts as an overpayment, allowing borrowers to potentially save on interest costs while still having access to their savings.
