There are lots of different home loans offered by lenders to suit many different purposes. In this guide, Director of Andrews Mortgage Services, Paul Bumford, looks at the most popular options to help you choose the one that suits you best.
The initial lump sum that you put into buying your home (not including the money you’re borrowing) is known as the ‘deposit’.
The bigger your deposit, the more likely you are to get a better interest rate on your home loan. That’s because your mortgage will then form a smaller percentage of the price of your new home, which generally attracts a lower interest rate. The actual amount you can borrow depends on a number of things, and can also vary by lender. We recommend you speak to a mortgage advisor so they can review your individual circumstances.
Standard Variable Rate
The Standard Variable Rate is a standard interest rate that a lender will set and which can then go up or down in line with market rates (such as the Bank of England’s base rate).
“The advantage of the standard variable rate is that you have more flexibility and can usually repay your mortgage without any early repayment charges. The disadvantages, however, are that your monthly payments can go up and down which can make budgeting difficult. What’s more, standard variable rate mortgages are not usually the lowest interest rates that lenders offer.”
With a Fixed Rate mortgage, your monthly payment won’t change for a set period. At the end of your fixed rate, your lender will usually change your interest rate to their Standard Variable Rate (SVR). It’s a good idea to review your mortgage at this stage because the lender’s SVR may well not be the best deal around at that time.
“With a fixed rate, you’ll know the exact amount that you’ll need to pay each month, which makes budgeting easier. Your monthly payment will stay the same during the fixed period, even if other interest rates increase. On the other hand, your monthly payment will stay the same even if other interest rates decrease. Also, if you want to repay your loan early, there could be early repayment charges.”
With a Tracker mortgage, the interest rate charged by your lender is linked to a rate such as the Bank of England base rate. This means that your monthly payments can go up or down.
“With tracker mortgages, the rate you pay tracks another headline rate by a set percentage until a set date. If the headline rate changes, your tracker rate changes by the same amount, so normally your interest rate will be following the trends in the marketplace.
“However, it’s worth noting that some lenders impose a ‘collar’ which means the interest rate won’t fall below a certain level, even if the rate its tracking continues to reduce. With trackers, your monthly payments can go up or down which can make budgeting difficult.”
Early repayment charges may apply to Tracker Mortgages.
Andrews Mortgage Services provides independent advice on mortgages, with the simple aim of saving you money by moving your mortgage to a lower rate. And if you are buying or selling a home with us, our involvement can also speed up the moving process.
We do not charge for our advice. Instead, we simply charge a fee for processing your mortgage application. Our typical fee is £450, however the actual fee will depend on your circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We source from the whole of the market, with the exception of bridging loans.
When asked if they would recommend us to a friend
97% said ‘Yes!’
Based on 123 respondents to customer surveys carried out by Andrews Mortgage services during 2015