Category: Repayment Mortgages

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Different Types Of Repayment Mortgages

Standard Variable Rate Mortgages Standard Variable Rate or SVR is a type of mortgage where the interest rate can change, influenced by the Bank of England's base rate. Each bank sets its own standard variable interest rate which is usually a couple of percentage points higher than the Bank of England's base rate. SVR is one of the more common type of mortgages available with many leading lenders offering at least one, and sometimes offering several with different rates and terms to choose from. more financial information¬† You are most likely to continue onto this type of mortgage after finishing a Fixed Rate, Tracker or Discount Mortgage. A lender can raise or lower its SVR at any time and, as a borrower, you have no control over what happens to it. An advantage of this type of mortgage is that you are generally free to make overpayments or switch to another mortgage deal at any time without having to pay a penalty charge. Another benefit is that the interest rate will usually go down if the Bank of England's base rate goes down. The disadvantage is that the rate can increase at any time and this is worrying if you are on a tight budget. The lender is free to increase the rate at any time, even if the Bank of England's base rate does not go up. Fixed Rate Mortgages A fixed rate mortgage means that the rate of interest is fixed for the duration of the deal. Fixed rate mortgages are suitable for those who want to budget and prefer to know exactly what their monthly outgoings will be. You do not have to worry about general increases in interest rates, and can be safe in the knowledge that your payments will not go up during the fixed rate period. An early repayment charge may apply if the mortgage is repaid during the fixed period. In addition to Standard Variable Rate and Fixed Rate Mortgages there are a few other kinds you may wish to consider before picking the right one for you. You could even combine a few of the options. Discount Variable Mortgages Basically a Discount Mortgage offers an introductory deal. This type of loan is cheaper than the Standard Variable Rate at the start of your mortgage. It allows you to take advantage of a discount for a set period of time at the beginning…