Guide to mortgages
Why it’s best to use Motgtage.uk.com
No matter if you’re a first-time buyer or a seasoned home buyer the process of finding a mortgage can be a confusing and stressful. It’s no great surprises that there is confusion and stress as there are hundreds new deals joining the already crowded market daily and these deals all have their unique nuances. But this confusion pales in comparison to the importance of the getting the right deal because you’re probably never going to borrow this amount of money again.
The good news is that mortgages aren’t that complicated, and you’ve found mortgage.uk.com. Our guides and experts will help you enter a mortgage deal with confidence and keep your stress levels manageable.
First, let's deal with the Basics
What is a Mortgage
A mortgage is a loan which is taken out to help people purchase property or land. The Loan is secured against the value of the property until the loan/mortgage is fully paid off.
Most Mortgage loans are for 25 years, but there are some 30-year mortgages are coming on to the market. If you do not keep up with your mortgage payments, the lenders have the right to repossess the property and sell it to reclaim the money borrowed.
That was the easy part now let's look at the main mortgage types.
How do fixed rate mortgages work?
Fixed rate mortgages guarantee to the borrower that no matter what is happening in the;
- Financial Markets
- Housing markets
- Bank’s Standard Rate
- Bank of England’s base rate
Their mortgage interest rate and rate of repayment will remain the same as what the agreed with the lender from the beginning.
The borrower will be protected against any changes to the interest rates that would usually increase your mortgage repayments and possibly put their home at risk on the flip side if interest rate fall then you will not benefit from the savings.
One of the main advantages of a Fixed rate is you'll always know what your repayments will be each and every month. It is for this reason that people who are looking for long-term security will go for fixed rate products. They can also be a great starter mortgage and can be quickly remortgaged once the specified period has been reached.
Read more about fixed rate mortgages
What are Variable Rate mortgages?
Variable rate mortgages are directly linked to interest rates and can change at any time throughout the duration of the loan. When national interest rates set by the Bank of England rise and fall the interest rate of your lender's products will also rise and fall and in turn, so will your mortgage.
Variable rate mortgages are worth considering then if rates are high, and you don’t want to fix into repayments at that level or if you want a cheaper mortgage and know you will be making early repayments.
Read More about Standard Variable Rate Mortgages
What are Tracker Mortgages?
Tracker mortgages are mortgages in which the interest rate on the mortgage is set at an agreed level above the standard base rate. The mortgage then tracks that base rate religiously. Doing so means that such mortgages are often much cheaper than standard variable rate mortgages or fixed rate mortgages. Of course, with the tracker mortgage’s interest rate being linked to the Bank of England base rate, if that base rate changes then your mortgage rate will be of course change too.
Read More about Tracker Mortgages
Discount Rate Mortgages how do they work?
A good way of thinking about them is to consider them like a standard variable rate mortgage but with a special offer that is designed to draw you in. They operate at a level that is cheaper than your lender’s standard variable rate while also being linked to it. As an example, suppose your lender has their standard variable rate set at 5% but the discounted being offered is 2% then your mortgage rate would be 3%.
That discounted rate will typically be provided for a set introductory period, which can be anything between 2 and 5 years. As soon as that introductory offer ends you will be switched back to the standard variable rate. Discount Rate Mortgages are also known as discounted tracker mortgage
Read More about Discount Rate Mortgages