Finding the perfect mortgage for your needs can be overwhelming and intimidating. With so many mortgage products on the market, it can be challenging to identify the loan that will help you enjoy your home with financial peace of mind.
FIXED-RATE MORTGAGES
Fixed-rate mortgages are loans that come with a fixed interest rate for a given period, from two to 10 years.
These mortgages – especially those with two-year and five-year fixed terms – are among the most popular products and account for over 80% of loan options. They are particularly appreciated by first-time buyers because, as the terms will not change during the fixed term, and makes it easier to budget for.
PROS:
- You can count on the same interest rate for the duration of the fixed term
- You can choose the fixed term that suits you best, up to 10 years
- It makes it easier to budget and you are immune to future rate fluctuations
- You can get great initial fixed interest rates depending on the LTV
CONS:
- You are locked in for the fixed term period
- Fixed-rate mortgages do not offer much flexibility, and they are only portable with some mortgage products
- They come with early repayment charges if you pay off the loan before the fixed period ends
- If the base interest rates fall, your rate will remain the same
STANDARD VARIABLE RATE (SVR) MORTGAGES
Standard Variable Rate (SVR) mortgages are loans that come with a base interest rate decided by the lender. At the end of your fixed/Tracker rate period, your mortgage will be charged at the SVR.
SVR’ rates are higher than fixed-rate and tracker rates, and changes in the interest rate can be sudden and difficult to predict. Since the lender can change the rate at any time, they are often considered risky and expensive.
PROS:
- There are no Early Repayment Charges (ERC), so you can repay more of your loan at any time
- Your rate might decrease if the BoE base rate falls
CONS:
- The interest rate might change depending on the BoE base rate, but the lender can also increase it
- They can be expensive
- They might not be so convenient in a low-interest-rate environment
- It can be challenging to budget for
TRACKER MORTGAGES
Tracker mortgages are loans that come with an interest rate based on external rates, usually set by the BoE (Bank of England). The lender will add a percentage to this base rate. Today, this rate has reached one of its lowest levels at around 0.1%.
If the base rate of your mortgage increases, your repayments will also increase. With a tracker mortgage, you can benefit from drops in interest rates, but they are more challenging to budget for.
PROS:
- You can benefit from drops in the interest rate
- Today, the interest rate is at its lowest levels
- The interest rate is set by the Bank of England, not your lender
CONS:
- These mortgages are more challenging to budget for
- Your interest rate might increase if the BoE base rate goes up
OTHER TYPES OF MORTGAGES
Each buyer’s situation is unique, and so should their mortgage be too. However, thanks to the great availability of mortgage products on the market, you can be sure to find a tailored solution for your needs. You may want to find out more about self-employed mortgages or buy to let mortgages. Airborne Mortgage Solutions can help you find the right terms and rates to enjoy your new home with comfort and peace of mind.
Contact us for Loughborough mortgages, or take a look at the other areas we cover.