Types of Mortgages in Bedfordshire, Hertfordshire & Buckinghamshire.
Mortgages Explained
Fixed-rate mortgages
A fixed-rate mortgage is a type of mortgage where the interest rate remains the same for a set period of time, typically two, three, or five years. This means that your monthly payments will also remain the same during this period, which can provide you with peace of mind and make budgeting easier.
Advantages of fixed-rate mortgages
Known monthly payments: You know exactly how much you will need to pay each month, which can help you budget.
Security: You have the security of knowing that your interest rate will not change for a set period of time, even if other interest rates rise.
Cashback offers: Some lenders offer cashback when you take out a fixed-rate mortgage.
Security: You have the security of knowing that your interest rate will not change for a set period of time, even if other interest rates rise.
Cashback offers: Some lenders offer cashback when you take out a fixed-rate mortgage.
Disadvantages of fixed-rate mortgages
Higher interest rates: Fixed-rate mortgages typically have higher interest rates than variable-rate mortgages.
Early repayment charges: There may be an early repayment charge if you repay your mortgage early.
Early repayment charges: There may be an early repayment charge if you repay your mortgage early.
When is a fixed-rate mortgage right for you?
A fixed-rate mortgage could be a good option for you if you want to know exactly how much you will need to pay each month and you are confident that you will be able to afford the payments for the fixed-rate period. It could also be a good option if you are worried about interest rates rising.
Tracker mortgages
A tracker mortgage is a type of mortgage where the interest rate follows a benchmark rate, such as the Bank of England base rate. This means that your monthly payments will go up or down in line with the benchmark rate.
Advantages of tracker mortgages
Lower interest rates: Tracker mortgages typically have lower interest rates than standard variable rate mortgages.
Flexibility: You have the flexibility to repay your mortgage early without an early repayment charge.
Flexibility: You have the flexibility to repay your mortgage early without an early repayment charge.
Disadvantages of tracker mortgages
Interest rate uncertainty: Your monthly payments could go up if the benchmark rate rises.
No cashback offers: Tracker mortgages typically do not offer cashback.
No cashback offers: Tracker mortgages typically do not offer cashback.
When is a tracker mortgage right for you?
A tracker mortgage could be a good option for you if you are confident that you can afford the monthly payments even if the interest rate rises. It could also be a good option if you want a mortgage with lower interest rates than a standard variable rate mortgage.
Standard variable rate mortgages
A standard variable rate mortgage (SVR) is a type of mortgage where the interest rate can go up or down in line with the lender’s own internal rate. This means that your monthly payments could go up or down.
Advantages of SVR mortgages
Flexibility: You have the flexibility to repay your mortgage early without an early repayment charge.
No early repayment charges: There are typically no early repayment charges on SVR mortgages.
No early repayment charges: There are typically no early repayment charges on SVR mortgages.
Disadvantages of SVR mortgages
Interest rate uncertainty: Your monthly payments could go up if the lender’s internal rate rises.
No cashback offers: SVR mortgages typically do not offer cashback.
No cashback offers: SVR mortgages typically do not offer cashback.
When is an SVR mortgage right for you?
An SVR mortgage could be a good option for you if you are not sure how long you will be staying in your home. It could also be a good option if you are not worried about interest rates rising.
Discount variable rate mortgages
A discount variable rate mortgage (DVR) is a type of mortgage where the interest rate is initially set lower than the lender’s SVR. However, the interest rate can go up or down in line with the lender’s SVR after a set period of time.
Advantages of DVR mortgages
Lower interest rates: DVR mortgages typically have lower interest rates than standard variable rate mortgages.
Flexibility: You have the flexibility to repay your mortgage early without an early repayment charge.
Flexibility: You have the flexibility to repay your mortgage early without an early repayment charge.
Disadvantages of DVR mortgages
Interest rate uncertainty: Your monthly payments could go up if the lender’s internal rate rises after the initial period.
No cashback offers: DVR mortgages typically do not offer cashback.
No cashback offers: DVR mortgages typically do not offer cashback.
When is a DVR mortgage right for you?
A DVR mortgage could be a good option for you if you want a mortgage with lower interest rates than a standard variable rate mortgage. However, you should be aware that the interest rate could go up after the initial period.
Offset mortgages
An offset mortgage is a type of mortgage where your savings are linked to your mortgage. This means that the amount of interest you pay on your mortgage is reduced by the amount of money you have in your savings account.
Advantages
Budgeting: You know the maximum and minimum monthly payments you will have to make, which can make budgeting easier.
Security: You have the security of knowing that your monthly payments will not rise above the set level (the cap) during the fixed period, even if other interest rates rise. However, you could still benefit if rates fall during the specified period.
Security: You have the security of knowing that your monthly payments will not rise above the set level (the cap) during the fixed period, even if other interest rates rise. However, you could still benefit if rates fall during the specified period.
Disadvantages
Interest rate ceiling: Even if other rates fall, your interest rate for the set period will not go below the level of the ‘collar’.
Early repayment charges: There may be an early repayment charge if you repay your mortgage early.
Early repayment charges: There may be an early repayment charge if you repay your mortgage early.
Here are some of the pros and cons of shared ownership
Pros
- You can get on the property ladder with a smaller deposit.
- Your monthly payments will be lower than if you bought a property outright.
- It's a government-backed scheme, so it's more secure than other types of property ownership.
Cons:
- You'll still have to pay rent to a housing association.
- You may have to pay higher mortgage rates than if you bought a property outright.
- There are limited lenders who offer shared ownership mortgages.
- You may be limited in the type of property you can buy.
- You can’t rent out the property under the scheme.
If you’re considering shared ownership, it’s important to speak to a mortgage advisor to get more information and to see if it’s the right option for you.
- You can staircase, which means increasing the share of the property you own. This can be done when you remortgage.
- You can sell your shared ownership property, but you may have to give your housing association first refusal.
- Shared ownership properties are often leasehold, which means you'll have to pay ground rent and service charges.
Shared ownership can be a good option for people who want to get on the property ladder, but it’s important to weigh up the pros and cons before making a decision.