Mortgages
Mortgages
The house buying journey for many usually begins with arranging a mortgage. Homesearch have partnered up with a firm of Independent Financial Advisors. Getting the right type of mortgage is a vital aspect when buying your new property. There are many different types of mortgages available on the market for you to get your head round. Some of the main types available are:
Tracker
This mortgage tracks an underlying rate, such as the Bank of England base rate. It usually stays a set amount above or below this rate for the period of the loan. Some longer-term trackers also offer an initial discount. The benefit of a tracker, as opposed to a discount from the lender's SVR, is that if the underlying rate reduces then your rate will reduce simultaneously, whereas if you are discounted from the lender's SVR, there is no guarantee if, when and by how much the lender will follow suit, as they are not obliged to do anything. Tracker mortgages remove this conflict between you and the lender.
Fixed Rate
A fixed rate mortgage is a way of guaranteeing your payments for a set number of years. This means that whatever happens to the Bank of England base rate or the lender's SVR, your payments remain the same. If rates go up you will be better off and if rates go down you could be worse off, but the main benefit is you know what you need to pay each month and can more easily budget for it. Fixed rates can be from one year to the whole mortgage term. Generally, shorter term fixed rates are lower and more attractive, so shorter term rates of two to five years are the most popular.
Variable Mortgages
Each lender sets their own SVR so they can vary considerably. Generally this means that if the Bank of England puts the interest rate up or down, your Standard Variable Rate (SVR) will almost certainly follow, though not necessarily simultaneously. If rates go down, you'll save. If rates go up, so will your repayments - so you need to build some flexibility into your budget if you decide to go for this type of mortgage. The main reason someone may consider this type of scheme is to avoid any early repayment charges if they do not anticipate having the mortgage for long.
Discounted Variable
Each lender sets their own SVR so they can vary considerably. Generally this means that if the Bank of England puts the interest rate up or down, your Standard Variable Rate (SVR) will almost certainly follow, though not necessarily simultaneously. If rates go down, you'll save. If rates go up, so will your repayments - so you need to build some flexibility into your budget if you decide to go for this type of mortgage. The main reason someone may consider this type of scheme is to avoid any early repayment charges if they do not anticipate having the mortgage for long.
Find out how Independent Financial Advisors can help you with your mortgage needs.
Your details will be passed on to an independent Financial Advisor 0208 560 0125. Providing you advice throughout the house buying process, their aim is to deliver a personalised service taking into account your own individual circumstances.
Disclaimer: Your home may be repossessed if you do not keep up repayments on your mortgage.
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