Mortgage Types Explained
Fixed Rate Mortgage
You and the mortgage
lender agree to fix the interest rate owed on
your loan for a set period of time. This period of time is usually between 1 and 5 years but could be longer. The interest rate owed on your loan reverts
to the lender's Variable Rate after the agreed
period.
Offset Mortgage
Counts the money
you already have (in current
or savings accounts)
against the money you don't (your mortgage) to
reduce what you owe. Interest is not earned on your cash and can get it back
any time you want, but you don't pay any interest
on the equivalent amount of mortgage debt.
Discount Mortgage
Lenders offer a
new borrower a discount on their standard variable
rate, for a set period of time. Your payments
will go up and down, as with a standard variable
mortgage, but you pay less. After the agreed
set period the interest rate will switch to
the lender's usual variable rate.
Longterm Mortgage
For first-time buyers who are finding it difficult
to afford homes,
a longer term could be the solution. The obvious
benefit of a long term mortgage of perhaps 40
years is that it will reduce your monthly repayments.
Tracker Mortgage
The interest rate varies (up or down) in line with
the Bank of England base rate. These deals can last for a few years and revert to the lender's standard variable rate after that. A lifetime tracker is also available and can be for the whole mortgage term.
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