Standard Variable Rate (SVR)
Your monthly repayments rise and fall in line with changes in your lender’s standard variable rate of interest, not necessarily linked to the Bank of England base rate.Advantages
The lender does not usually charge an arrangement fee. There are usually no penalties if you redeem the mortgage – often called early redemption penalties.Disadvantages
You have no certainty over monthly repayments. Monthly repayments will be more expensive than other options with an incentivised rate for an initial period.Discounted Rate
Your lender gives you a discount against its SVR for a set period of time. It will normally revert to SVR after the initial period.Advantages
Repayments are lower than an SVR mortgage.Disadvantages
You have no certainty over monthly repayments. The lender will usually charge a one-off arrangement fee. There are usually early redemption penalties should you wish to redeem the mortgage during a period set by the lender.Fixed Rate
The interest rate is fixed by the lender for a set period. It will normally revert to SVR after the initial period.Advantages
Your monthly repayments stay the same even when interest rates rise. You can budget knowing what your monthly repayments will be.Disadvantages
Your monthly repayments stay the same even when interest rates lower. The lender will usually charge a one-off arrangement fee. There are usually early redemption penalties should you wish to redeem the mortgage during a period set by the lender.Base Rate Tracker
During a set period the interest rate tracks the Bank of England’s base rate. The interest rate is expressed as base rate + x%. The monthly repayments change every time the Bank of England changes interest rates. Some are ‘Stepped Trackers’ where the margin between base rate and SVR changes at the mortgage anniversary.Advantages
You benefit immediately from any reduction in interest rates by the Bank of England. Usually repayments are lower than an SVR mortgage.Disadvantages
You have no certainty over monthly repayments. You suffer immediately from any increase in interest rates. The lender will usually charge a one-off arrangement fee. There are early redemption penalties should you wish to redeem the mortgage during a period set by the lender.Current Account
A single account from which you run your day-to-day finances and your mortgage. It is like a current account with a large overdraft facility secured against your property.Advantages
The lender calculates interest on the current debit balance. There are no fixed monthly repayments; you can overpay, underpay or take payment holidays as long as the debt is within your agreed borrowing limit. Your savings effectively earn interest at the mortgage rate. You effectively have a credit facility where you only pay interest at the mortgage rate.Disadvantages
The lender will usually charge a one-off arrangement fee. The flexible repayment nature means you need self-discipline to ensure you repay the mortgage by the end of the term. If you are not a higher rate tax payer or have substantial savings, you may be better off with a more traditional option that has a lower interest rate. Also, other interest options sometimes allow overpayments and offer better rates.Offset
A similar idea to the current account mortgage but without a single account. Essentially, your mortgage debt is notionally reduced by the balance in your savings account; you pay interest on this notionally reduced debt.Advantages
You pay interest on a lower balance than with a traditional mortgage. You can usually overpay, underpay or take payment holidays as long as the debt is within your agreed borrowing limit. Your savings effectively earn interest at the mortgage rate.Disadvantages
The lender will usually charge a one-off arrangement fee. The flexible repayment nature means you need self-discipline to ensure you repay the mortgage by the end of the term. If you are not a higher rate tax payer or have substantial savings, you may be better off with a more traditional option that has a lower interest rate. Also, other interest options sometimes allow overpayments and offer better rates.Cashback
A mortgage that pays you an up front cash lump sum of either a fixed amount or a percentage of the mortgage advance.Advantages
Can be useful for first time buyers who may be on a tight budget andcould use the cashback for home furnishings.Disadvantages
There are redemption penalties should you wish to redeem the mortgage during a period set by the lender. The rate is often SVR or very close to it.Capped
The rate will not rise above a certain level for a set period.Advantages
Offers similar security to the fixed rate. Initial rates are usually competitive.Disadvantages
The lender will usually charge a one-off arrangement fee. There are early redemption penalties should you wish to redeem the mortgage during a period set by the lender. Rates are often higher than a fixed rate, and caps are normally only two or three years.Contact Us
We`re here to support you.
At the Mortgage Collective you will get a dedicated adviser that is CeMAP qualified who will help you throughout the entire process. They will take time to understand your circumstances and provide advice that right for you.
Give us a call on
0203 923 9333
Email Us
brokers@mortgagecollective.co.uk
