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Mortgages

Fixed Rate Mortgage.
The interest rate is fixed for a period of time. After this initial period it reverts to the lender's Standard Variable Rate.

Advantages:
Ability to budget - you know what you will be paying each month for the initial period.

Disadvantages:
Fixed only for an initial period not the whole mortgage term. If interest rates fall you could end up paying more than necessary. An arrangement fee may apply and an early repayment charge may be applied if the loan is redeemed before a specified date.

How a Discounted Rate mortgage works

Discounted Rate Mortgage.
With a Discounted Rate Mortgage the mortgage interest rate is reduced by a specified amount for a set period.

Advantages:
When the lender's Standard Variable Rate falls so do your monthly payments and it can provide lower monthly mortgage payments at the start of the mortgage.

Disadvantages:
An arrangement fee may apply and an early repayment charge may be applied if the loan is redeemed before a specified date. Less easy to budget than with a fixed rate mortgage.

How a Standard Variable Rate mortgage works

Standard Variable Mortgage.
This is the normal rate charged by the lender without any discounts or special deals. It can be changed by the lender in line with market conditions. This is usually the interest rate that a lender will revert to once the initial deal has finished.

Advantages:
Often no early repayment charges.

Disadvantages:
Often higher rate than fixed / tracker / discounted mortgages.

How an Offset mortgage works

Offset Mortgage.
An offset mortgage links your savings or your current account to your mortgage. Interest is calculated on the difference between savings and the mortgage rather than the whole mortgage amount.

Advantages:
• Interest only charged on mortgage balance outstanding once savings balance deducted.

Disadvantages:
• Interest rates can be higher than equivalent non offset products.

How a Tracker Rate mortgage works

Tracker Rate Mortgage.
The interest rate on your mortgage moves up and down with a particular base rate, such as the Bank of England base rate.

Advantages:
When the index (for example the Bank of England base rate) falls, so will your monthly payment.

Disadvantages:
If the Bank of England rate goes up, so do your monthly payments. Often a minimum % is specified. An arrangement fee may apply and an early repayment charge may be applied if the loan is redeemed before a specified date. Less easy to budget for than with a fixed rate mortgage.


For More Information and Further advice Please contact our preferred Mortgage Company and Financial Services Partner Mortgages and Insurers.

 

http://www.mortgagesandinsurers.co.uk/

 

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