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are a number of different mortgage products available for the UK market. Most
mortgage brokers will offer a selection of these products with different
interest rates. Below is a list of the varying products.
Standard Variable Rate
This mortgage is based on the brokers own standard variable rate which they
can change any time. It is set higher than the Bank of Englandís base rate and
fluctuates in relation to this base rate. This means the monthly payment rises
when the base rate rises and lowers when it lowers. This makes the standard
variable rate one of the more expensive options.
This mortgage product offers a percentage off of the mortgage brokers standard
variable rate for a set period of time, sometimes as long as five years. The
Discount Mortgage works in the same way as the standard variable rate but at a
lower monthly payment for the agreed time.
Similar to a discount mortgage but the tracker follows the Bank of Englandís
base rate. This product varies in the length of time it can be agreed on, from
as little as one year to the entire length of the mortgage. Some lenders will
offer a tracker at a rate slightly lower than the base rate whilst others
offer it at a percentage above. Both deals move in accordance to the changes
of the Bank of Englandís base rate.
This product has a fixed rate of interest but is usually only available for a
length of time between one and five years. During the agreed time the monthly
repayments will not increase which can end up saving you money should interest
rates rise. However, if interest rates go down you could end up paying more
each month than on a variable rate mortgage.
Interest- only Mortgage
After you have decided what kind of product is right for you, the next step is
deciding on whether to go with an interest-only or a repayment mortgage. With
an interest-only mortgage, each month you pay back the interest accumulated on
the loan. The loan itself is paid off just before the mortgage ends.
This is the most common way to pay off the loan. Each month the interest and a
percentage of the capital are paid off. This guarantees that by the end of the
mortgage agreement, the mortgage will be paid in full.