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Types of Mortgages in the UK


Types Of Mortgages In The UK You Can Still Get With A Bad Credit

The variety of mortgage products available in the UK may be overwhelming to those unfamiliar with mortgages. The main two types of mortgages in the UK are the fixed-rate and variable mortgages. There are also a few specialist types for different circumstances. Here is a brief overview of the main types of mortgages in the UK.

The types of mortgage accessible in the UK might overpower those new in the area. The major two kinds of mortgage in the UK are the fixed-rate and variable mortgage. Here is a concise review of the major types in the UK

Fixed-rate mortgages

These types of mortgages come at fixed-rate interests for periods of about two to five years and the interest rate moves onto the lender’s standard variable rate at the end of the fixed-rate time frame. These mortgage types are popular with UK home-buyers with about 75% of the mortgages in the UK being granted as fixed-rate mortgages.The standard variable rate can be expensive;thus, homeowners usually remortgage their property when the fixed-rate period ends and lenders often offer mortgages to people for terms of around 25 years but shorter and longer mortgages can be negotiated.

Discount mortgages

This is a mortgage where the interest rate is at a set amount below the lender’s SVR (standard variable rate) for either a set period or for a whole mortgage. In other words, The SVR it is a form of SVR mortgage with a discount applied to the Standard Variable Rate for a limited period of time and at an interest rate set by the lender, which can be raised or lowered by any amount and at any time. The amount you pay in discount mortgage could change from month to month. In UKthe UK, you will need to calculate the discount and the Standard Variable Rate applied by the lender while getting a mortgage.

Tracker mortgages

A tracker mortgage is type of mortgage where the interest rates an individual would usually pay is based on an external rate which is usually the Bank of England base rate added to a set percentage. Currently, the base rate is 0.75%.  If the interest rate on a tracker mortgage was the base rate +1%, the amount of interest an individual would pay is 1.75% and if the base rate increases, the interest rate on the tracker mortgage would also increase.

Variable rate mortgages

A variable rate mortgage is a type of mortgage in which the interest rate is not fixed. They interest are adjusted at a level above a specific reference rate such as LIBOR + 2 points. Lenders can offer to borrowers an adjustable rate mortgage which includes both a variable and a fixed rate that resets periodically as well as variable rate interest over the life of a mortgage loan.

Variable rate mortgages can change and depend on the general interest rate and this makes them more risky than fixed-rate mortgages in the UK. They can be advantageous if interest rates suddenly drop. A lot of variable rate mortgages are SVR (standard variable rate), which is a rate set by individual lenders and they can change at any time. For example, after a rise or fall in the base rate set by the Bank of England)

Offset mortgage

These mortgages are linked to the individual’s savings so that the balance on their savings account are used to reduce the amount of interest charged on their mortgage. Offset mortgages can either shorten the length of the mortgage term or decrease the monthly payments.

Capped rate mortgages

A capped rate is an interest rate that is allowed to change, but which cannot exceed a specified interest cap. This implies that the interest rate is capped on a variable rate mortgage and cannot increase above a certain amount. A capped rate mortgage issues a starting interest rate that is normally a specified spread above a specified rate, such as LIBOR. Example, the loan’s rate might be LIBOR +2%. Then, the loan rate fluctuates based upon the movement of the bench rate.

A number of capped rate mortgages are only offered at a higher standard rate than other variable rate mortgages in the UK.[/vc_column_text][/vc_column][/vc_row][vc_row el_class=”seo-link-sec hide”][vc_column][vc_empty_space height=”50px”][vc_column_text][slick-slider category=”28″ design=”design-5″ speed=”2000″][/vc_column_text][/vc_column][/vc_row][vc_row el_class=”call-out-sec stretch-sec” css=”.vc_custom_1568018042545{background: rgba(0,0,0,0.88) url( !important;background-position: center !important;background-repeat: no-repeat !important;background-size: cover !important;*background-color: rgb(0,0,0) !important;}”][vc_column][vc_column_text]

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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