All The Remortgage Deals Available At Present And What They Mean
- By Marcus Selmon
- Published 01/6/2012
- Real Estate
- Unrated
Since the financial crisis, the country has been in turmoil and people have stopped spending. As a result, the Bank of England dropped interest rates to a record low, but now they have confirmed that rates will increase again in the near future. This has led to fixed rate mortgages growing in popularity. Here we explain the various mortgage deal types available to you.
The most basic deal type is the 'Standard Variable Rate', which is the lender's standard rate and the basis of most deals. The interest rate is flexible and fluctuates, and the lender can change the rate at any time without notifying you.
One of the benefits of this type of mortgage deal is that there is no tie in, unlike with other mortgage deal types, so you don't have to pay any fees to exit the contract. The downside is that they are variable so if interest rates increase then so does your mortgage and thus your repayments.
Because interest rates are due to rise in the very near future, fixed rate mortgages have become extremely sought after. Fixed rate contracts have an interest rate that remains level for a specified period of time, and it does not increase or decrease during that period.
At the end of the fixed period, as mentioned earlier, the standard variable rate kicks in so your monthly repayments become varied and can change from month to month. If you repay the mortgage before the end of the fixed period, your lender will charge
you an early repayment charge too.
Discounted mortgages are not so common today, but they are still available. The initial period offers a discounted interest rate, which may be for example 2% lower than the base rate. Like fixed rate contracts, they would then revert to the standard variable rate of the lender.
This type of contract have historically been popular with first time buyers, as often finances can be tight when buying a first home, so this allows them to benefit from lower repayments initially. A disadvantage here is that discount mortgages have large fees to pay at the beginning of the deal.
Offset mortgages are another deal type, and they are more often than not seen as complex. The reality is that they are no more complicated than any of the other deals. It is simply a mortgage with a savings account that runs alongside it, which is used to make overpayments
As and when you have surplus funds available, you can pay these into your savings and this will be used to reduce the amount that you owe to the lender. Interest is only paid on the amount that you owe. So if you owe GBP100k, and your savings account holds GBP20k, you only pay interest on GBP80k. An offset mortgage can allow you to repay your mortgage far more quickly that other contract types.
It may be an idea to use the services of a mortgage broker, who may be able to explain the jargon to you and help you through the entire mortgage process. Making the decision alone isn't easy, but with their help you'll know you've made an informed choice.
The most basic deal type is the 'Standard Variable Rate', which is the lender's standard rate and the basis of most deals. The interest rate is flexible and fluctuates, and the lender can change the rate at any time without notifying you.
One of the benefits of this type of mortgage deal is that there is no tie in, unlike with other mortgage deal types, so you don't have to pay any fees to exit the contract. The downside is that they are variable so if interest rates increase then so does your mortgage and thus your repayments.
Because interest rates are due to rise in the very near future, fixed rate mortgages have become extremely sought after. Fixed rate contracts have an interest rate that remains level for a specified period of time, and it does not increase or decrease during that period.
At the end of the fixed period, as mentioned earlier, the standard variable rate kicks in so your monthly repayments become varied and can change from month to month. If you repay the mortgage before the end of the fixed period, your lender will charge
Discounted mortgages are not so common today, but they are still available. The initial period offers a discounted interest rate, which may be for example 2% lower than the base rate. Like fixed rate contracts, they would then revert to the standard variable rate of the lender.
This type of contract have historically been popular with first time buyers, as often finances can be tight when buying a first home, so this allows them to benefit from lower repayments initially. A disadvantage here is that discount mortgages have large fees to pay at the beginning of the deal.
Offset mortgages are another deal type, and they are more often than not seen as complex. The reality is that they are no more complicated than any of the other deals. It is simply a mortgage with a savings account that runs alongside it, which is used to make overpayments
As and when you have surplus funds available, you can pay these into your savings and this will be used to reduce the amount that you owe to the lender. Interest is only paid on the amount that you owe. So if you owe GBP100k, and your savings account holds GBP20k, you only pay interest on GBP80k. An offset mortgage can allow you to repay your mortgage far more quickly that other contract types.
It may be an idea to use the services of a mortgage broker, who may be able to explain the jargon to you and help you through the entire mortgage process. Making the decision alone isn't easy, but with their help you'll know you've made an informed choice.
Marcus Selmon
Marcus Selmon writes for Just Commercial Mortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
View all articles by Marcus Selmon