Types of Mortgage
Before choosing any mortgage it is important to see what types are available
and what they actually mean. We will also explain the advantages
and disadvantages of each type where possible.
If you have any further questions, please feel free to email us
Variable Rate
Variable rate is a rate that moves in line with the lenders prevailing standard variable rate.
- Usually no application, arrangement or Early Repayment Charge fees.
- Your monthly repayments will fall with reductions in interest rates.
- Gives you flexibility.
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- Your repayments will rise with interest rates.
- Does not give you ability to budget for repayments.
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Capped
A capped or ceiling rate is a limit above which the interest will not exceed.
E.g. 5% for two years capped. Rate can fall below 5% but not rise above.
- Gives you a guaranteed rate which repayments cannot exceed.
- If interest rates fall your repayments will reduce with them.
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- Usually the Capped rate is higher than a fixed rate because repayments can fall with interest rates.
- Usually have to pay application and/or arrangement fees.
- If the loan is redeemed during the capped period and in some cases for a short while after, a penalty fee of several months repayments is normally payable.
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Discount
Where a rate is guaranteed to be a fixed percentage below the standard variable rate for a set period.
E.g. 2% discount for 2 years. The interest payable during the first 2 years will be 2% below the standard rate.
- Gives a reduced repayment over the period of the discount.
- Repayments will reduce with interest rate falls.
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- Repayments will rise with interest rates.
- May have to pay application and/or arrangement fees.
- Usually a penalty payment of several months interest if redeemed during or shortly after discounted period.
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Capital Raising
A remortgage usually involves the changing of lenders for the client. Clients normally re-mortgage for the benefit of :-
- Raising of capital
Using equity to release capital for any reason (lawful). Usually consolidating debts or home improvements.
- Reducing payments
Changing to a lower rate or moving to a flexible mortgage.
- Flexible mortgage
Taking advantage of flexible approach to payment.
Think carefully before securing other debts on your home. Your home may be
repossessed if you do not keep up repayments on your mortgages.
A fee may be charged for advising on or arranging mortgages or between
1 and 3% of the sum borrowed. The exact amount will depend upon your circumstances
but we estimate it will be 1% of the loan amount.
