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Fixed rate mortgage.
As a borrower you are offered a fixed rate of interest for a fixed term. The rate is guaranteed and remains unaltered despite changes in overall interest rates. It can work to the borrower’s advantage and disadvantage.
The length of the fixed rate is agreed at outset between the lender and the borrower and could be anything between a few months and a few years.
Variable rate mortgage.
The rate of interest required by the lender will vary from time to time in line with overall interest rates. This can be to your advantage if interest rates fall and conversely if they rise. Many lenders modify the payments on an annual basis.
Capped and collared mortgages.
The borrower is charged the current interest rate, say 7%, but is given a guarantee that the rate will never rise above, say 10% - a cap.
Conversely the interest rate paid by the borrower will not be allowed to fall below 6.5% (the collar) even if overall rates fall beneath this.
Discounted mortgages.
Lenders offer a discounted rate of interest for a short period usually a maximum of 12 months e.g. 3.75% discount for 12 months.
The discounted rate is usually only offered to first time buyers. At the end of the discounted period the rate of interest reverts to the current variable rate being charged to borrowers.
Low start mortgage.
This is a repayment mortgage with a difference. In the initial period which may be two years, only interest is paid to the lender.
In year three the full repayment mortgage starts on the total loan and payments will be more expensive.
Deferred interest mortgages.
In this case, the borrower pays only part of the interest for a period. At the end of the period the full mortgage starts and the loan has been increased by the deferred and unpaid interest.
Please contact us to discuss your mortgage rate options.
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