The right mortgage for you will depend on you and your circumstances. Loan.co.uk will be more than happy help you with expert advice as there are plenty of mortgage options to choose from. Here’s a quick overview:
Tracker. A tracker rate mortgage tracks the Bank of England over a set period of time (from two years to the entire length of the mortgage. For example, if the tracker mortgage is set at 2% above the base rate and the base rate was 0.75%, the rate to start with would be 2.75%.
Tracker with cap rate. This is the same as a tracker, but with the amount that the rate can go up capped at a certain maximum level. For example, it could be capped at 3.5%
Variable rate. Most tracker mortgages revert to a variable rate once the set time period is up. Variable rate mortgages can go up or down depending on decisions made by the Bank of England or the lender.
Fixed. The interest rate on your mortgage is fixed at the same rate for a set period, usually for two, three or five years. So, whether interest rates go up or down, you’ll have the peace of mind knowing that that your mortgage repayments will remain the same, enabling you to budget with confidence.
Whether you choose a tracker, fixed, or variable rate mortgage, it comes down to just two repayment options; capital and interest or interest-only.
With the capital and interest option, each monthly repayment you make will both chip away at the capital balance (the loan amount) you owe and pay the interest due on the loan. As time goes by, the capital portion of each monthly repayment becomes larger and the interest part becomes smaller. At the end of the mortgage term (the amount of time you spread your mortgage repayments over), as long as you make all your repayments on time and in full, the mortgage will be repaid and the property will be all yours.
With an interest-only mortgage, you just pay the interest on the amount you borrow. So, you would need to set-up a separate repayment vehicle to pay off the mortgage at the end of term.
To help you to choose the best options for you, be sure to check with a mortgage broker such as Loan.co.uk