mortgages at a glance
There are a wide variety of mortgage products on the market, as well as different ‘rates’ and payment options, to suit a broad range of personal circumstances.
Please note: your home may be repossessed if you do not keep up repayments on your mortgage.
Here’s a summary of the most common types of mortgage that you may encounter:
Standard variable rate (SVR)
This refers to the lender’s standard rate of interest, which, as they are usually linked to the Bank of England base rate, is variable. While you may not choose an SVR mortgage from the outset, in most instances you will automatically be switched to it when your initial offer expires.
Fixed rate
Often competitive, the rate is set for a fixed period but at the end of that period, will revert to the lender’s SVR – a rate that can be more expensive. The benefit of this type of mortgage is knowing that your payments will not change in the fixed rate period.
Discounted rate
If you need the potential to save money in the first few years of your mortgage, then a discount rate is worth considering. This offers a reduction on the lender’s SVR. If the SVR changes, so will the rate you pay. At the end of the discount period, your mortgage will revert back to the lender’s SVR.
Tracker rate
Tracker mortgage rates usually move in line with the Bank of England base rates. By doing this, you get the certainty of knowing the rate you pay will move automatically with base rate changes. When the base rate falls, your interest rate will reduce and vice versa.
Capped rate
This means you get a variable mortgage rate, but the rate will not rise above a pre-set ceiling (the cap) over an agreed period. Knowing the maximum interest rate you will have to pay during this time can be very helpful to those who may need to keep a close eye on outgoings.
Flexible
These allow you to overpay, underpay, take repayment holidays, skip repayments, and withdraw or deposit lump sums. Naturally, making regular overpayments are very useful for reducing your monthly mortgage bill. Many standard mortgages have some flexibility, so it’s worth speaking to one of our mortgage advisers to find out what deals are available.
Offset
With an offset mortgage, your current account and savings account are linked to your mortgage. Every month your lender reduces the amount you owe by the amount in these accounts, after which it works out the interest due on the mortgage balance. The more you have saved, the less interest you will pay and vice versa.
Current Account Mortgage
Similar to an offset mortgage, here your current account is combined with your mortgage to create one account. Your lender will require a minimum level of savings to be held within the account each month. The more you have saved in the account, the less interest you will pay.
Cashback
These tend to be SVR mortgages that pay out an upfront lump sum when the mortgage is taken out. Very useful for first-time buyers to help pay for home furnishings, etc., though you may find the interest rate offered is not the most competitive.
Remortgage
Remortgaging is simply replacing one mortgage by taking out another, secured on the same property. By doing so, you can take advantage of a more suitable product or better interest rate.
Buy-to-let mortgage
A popular mortgage for people buying property as an investment. The amount banks or building societies will lend depends on the property’s expected rental income, rather than personal income. You will usually need a substantial deposit and have to meet certain conditions specific to the lender.
Contact us now
Call our mortgage advisers on 0800 107 0190 or email us at financial.services@ecclesiastical.com to find out which type of mortgage is right for you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
