Mortgages

What Is A Fixed Rate Mortgage?

A fixed rate mortgage is where the interest rate is held for a pre-set period of time and the rate will be held regardless of any fluctuations in the rate. With a fixed rate mortgage your payments will remain the same for as long as the mortgage is fixed (typically 1-5 years).

Variable Rate Mortgage (Tracker)

With a variable rate mortgage, your interest rate is linked to the Bank of England’s base rate. This means that if the base rate rises by .25% or lowers by .25%, the interest rate on your mortgage will rise or lower by a corresponding amount.

Discount Rate Mortgage

A discount rate mortgage is essentially a standard variable rate mortgage, so it still moves in line with the Bank of England’s base rate, but it also has a discount thrown in for a set period of time (typically 1-5 years.) With a discounted rate the rate and the mortgage payments can fluctuate in line with change in the base rate but the underling rate will always be discounted by the discount that was agreed at the outset and for the period that was agreed at the start of the mortgage.

Repayment Method

There are two main repayment methods that you can consider when taking a new mortgage.

Repayment Mortgage

Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term and you will own your property outright.

Interest Only Mortgage

Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term and you will own your property outright.

Interest Only Mortgage

Your monthly payments cover only the interest on the loan. They do not pay off any of the original loan. You will need to arrange to pay separately into a savings or investment scheme (e.g. pension mortgage or endowment) to build up savings to pay off the mortgage at the end of the term. It is your responsibility to make sure you have enough money to repay the mortgage at the end of the term; otherwise you could lose your home.