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Mortgage Types

Whether you are a first time buyer or looking to re-mortgage, Kellands offers an independent mortgage service you can rely on.

Our service guides clients from initial enquiry stages through to the move-in day as well as taking care of your interests as time moves on.

We have a wealth of experience and will cut through all jargon to help you understand your options and the mortgage which best suits your needs.

There is a lot of choice available yet it is not always clear which products are right for you now and over the longer-term. Here is a guide to some of the mortgage types available.

FIXED RATE MORTGAGES

A fixed rate mortgage means that the interest rate remains the same for a set period of time, most commonly for between two to five years. When this period comes to an end, mortgages typically transfer automatically onto the lender’s Standard Variable Rate (SVR).

WHAT ARE THE BENEFITS OF A FIXED RATE MORTGAGE?

One of the main benefits of a fixed rate mortgage is the certainty it offers as every month during the fixed rate period, repayments remain exactly the same. It helps you to plan ahead and budget more easily without worrying about sudden base rate increases which can then lead lenders to raise their rates.

WHAT ARE THE DISADVANTAGES OF A FIXED RATE MORTGAGE?

In some cases, fixed rate mortgages can have higher rates than Standard Variable Rate (SVR) mortgages and you wouldn’t benefit from a fall in monthly repayments should your lender decide to reduce their SVR rate. It is also common to face early repayment charges if you decide to repay your mortgage before the end of the deal.

STANDARD VARIABLE RATE MORTGAGES (SVR)

A Standard Variable Rate mortgage (SVR) is the lender’s default rate, with no special offers or discounts attached.

A lender can raise or lower its SVR at any time. SVR can be influenced by the changes in the Bank of England’s base rate however lenders can change their SVR even when the base rate remains unchanged.

BENEFITS OF STANDARD VARIABLE RATE

If the Bank of England base rate is low or falls, you can benefit if your lender follows suit and lowers its rates. This reduces your monthly repayments.

DISADVANTAGES OF STANDARD VARIABLE RATE

A lender can raise its SVR at any time, so if you’re on a tight budget, rate rises could lead to repayment difficulties.

DISCOUNT MORTGAGES

This is a type of variable mortgage where the interest rate is set at a certain ‘discount’ below the lender’s SVR for a set period of time. Discount mortgage deals typically last between two and five years, and when it comes to an end, mortgages typically transfer automatically onto the lender’s Standard Variable Rate (SVR).

DISCOUNT MORTGAGE BENEFITS

By taking out a discount mortgage, you will remain below your lender’s SVR for a number of years. In certain circumstances, this may mean that your discount mortgage has a very low rate of interest.

DISADVANTAGES OF DISCOUNT MORTGAGES

Discount rates track the lender’s SVR rate and this rate can change. Borrowers may find that their repayments are significantly higher when the discounted period comes to an end and their mortgage is transferred onto their lender’s SVR.

TRACKER MORTGAGES

A tracker mortgage is a type of variable rate mortgage. The interest rate in this case tracks the Bank of England base rate at a set margin above or below it. Tracker mortgages can last for a short amount of time (around a year) or even up to the total life of the loan. Once your tracker period comes to an end, you’re likely to be automatically transferred on your lender’s standard variable rate (SVR). Typically, this will have a slightly higher rate of interest.

ADVANTAGES OF A TRACKER MORTGAGE

In certain economic situations, borrowers are able to secure tracker mortgages with very low rates of interest. A tracker mortgage is only dependent on the changes in base rate and not the lender’s SVR.

DISADVANTAGES OF A TRACKER MORTGAGE

If the base rate rises, so will the interest you pay. As with all variable rate mortgages, a tracker mortgage may not be suitable if you prefer to know exactly how much your repayment will be each month.

The guide is a breakdown of many of the typical mortgage types available but to gain a clearer insight into which mortgage best suits your individual circumstances, please contact our team.

Your home may be repossessed if you do not keep up repayments on your mortgage.