What are the different types of mortgage products?
Broadly speaking, there are four types of mortgage products available:
Fixed: This is a mortgage rate where the interest rate is agreed at the start of the mortgage and will not change during the term of the fixed rate. So you know exactly how much your monthly payments will be each month during the fixed rate period.
Discounted: A discounted rate mortgage offers you reduced repayments for a given term. This interest rate is discounted from the published bank standard variable rate, for an agreed period from the start of the mortgage.
What this means for you the borrower is that you are guaranteed to pay a set amount below the standard variable rate for the period of the discount. The standard rate can go up and down, but the discount amount remains fixed during the agreed period.
Tracker: This is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. Therefore when the Base Rate changes, the rate on your tracker mortgage changes by the same amount.
Capped: This is a type of loan where a maximum rate of interest is set at the start of the mortgage term. During the capped rate period the interest rate can fall below the capped rate but will never rise above it.
What this means for you the borrower is that you know how high the mortgage payments could rise but are guaranteed the rate will not go any higher, therefore making home loan budgeting easier.
If you need any more information, then simply speak to an expert today.
