mortgageproducts

There are many different types of mortgage products on offer to suit many different needs.

Below is a guide to the most common options. Remember, our mortgage advisers will help you choose the product that best suits your circumstances.

Variable Rate
A standard variable rate mortgage occurs when the interest rate goes up and down during the lifetime of your mortgage, broadly in line with interest rates in the economy as a whole.

This means that when interest rates go up, the amount you have to pay back each month increases as well. Consequently when the interest rates falls, so do your monthly repayments.

Some lenders offer a way to level out these changes over the year. Interest rates go up and down in the same way, but your repayments only change once a year. This doesn't necessary mean that you save or pay anymore, but it makes it easier to budget one year ahead.

Some variable rate products specifically track the Bank of England Base Rate (BBR). This is the rate at which banks lend money to each other. 

Capped Rate
With a capped rate mortgage the interest rate is variable but will not go above an agreed limit for a guaranteed period of time. After the set period it will then revert to the lenders standard variable rate, what ever it is at that time.

You may have to pay an early repayment charge for repaying the mortgage early.

There is also likely to be an arrangement fee paid to the lender on application.

Discount Rate
You will start off with a discount from the variable rate for a set agreed limit of time, i.e. 2 years. After the discount period ends the rate will change to the standard variable rate. So even at the start of the mortgage your repayments could both increase or decrease, depending on interest rate changes.

You may have to pay an early repayment charge for repaying the mortgage early.

There is also likely to be an arrangement fee paid to the lender on application.

Fixed Rate
You will pay a fixed repayment for a guaranteed period of time. If interest rates change during this period your repayments will stay the same. At the end of this period the monthly repayments will be calculated using the standard variable rate.

There is usually a wide choice of benefit terms available, i.e. 2,5 and 10 years. Generally the longer the fixed period the higher the rate.

There is likely to be an arrangement fee to set up the fixed rate, paid to the lender on application.

If you change your mortgage product and/or lender during the set period, then you may have to pay an early repayment charge

Flexible Mortgage
With a flexible mortgage, you can vary your repayment to suit you changes in income.

You can also take payment holidays, subject to certain conditions, although you will still incur interest during this time

You can usually pay off your mortgage early without any penalties.

Offset Mortgage
Offset mortgages allow you to save money by ‘offsetting’ the interest you pay by taking account of your credit balances in other accounts, such as your savings or current account. 

With these products if you have for example £5,000 in a current account and a mortgage of £150,000 - then instead of being charged interest on £150,000 you are charged interest on £145,000. This means that the money in your current account has earned the same amount of interest as the level of interest that you pay on your mortgage.

Also, because you have not earned interest on you savings or current account, you save on any tax you would have eligible to pay.

Cashback
Cashback is a sum of money and is normally a feature that is added to one of the products described above. It is usually  paid to you by the lender, after completion of your mortgage. This often appeals to first time buyers.

There is likely to be arrangement fee to pay upfront and early repayment charges may apply if you change your mortgage product/lender during a period set at the outset which may include part or all of the cashback allowance.

Contact our helpline on 01206 240800 today to see how we can help you with your mortgage arrangements