Types Of Mortgages Available In The United Kingdom
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Customers are offered a variety of mortgages and many find it tough to decide on which is the right kind of mortgage plan for them. It is better to seek professional counselling in order to fully understand the benefits of the various kinds of mortgages and their advantages and disadvantages enabling a person to make an informed decision. Credit unions, banks or building societies in the United Kingdom are primary funding sources of mortgage Loans. As the competition is stiff the market has evolved as one of the strongest markets in the world. The various lenders set interest rates based on the base rate set by the Bank of England.
Types Of Mortgages
Many customers seem to prefer a fixed rate mortgage. The rate remains fixed for the duration of the mortgage and is not influenced by base rate fluctuations. This is popular with people who are on a budget and who fear escalation of the base rate in future.
Variable rate mortgages are also available. The base rate determines the rate charged and so customers may gain if the base rate were to decrease resulting in decreased monthly payments and if the base rate were to increase, they may result in increased monthly payments. People usually opt for them when base rate is on the decline and expected to stay that way for sometime.
Discount rate mortgages offer a certain period of discounted rate such as for 2 or 5 years after which the mortgage reverts to a higher standard variable rate. The longer the period of discount the lesser the discount offered. This means that customers can get lower rates than bargained for if the base rate were to decline, and risk increased rates if the base rates were to increase!
Flexible Mortgages are for those whose cash flow keeps changing and who need a flexible mortgage that they can adjust according to their financial situation. They may make lump sum payments, increased or decreased payments or take payment holidays and borrow too.
Capped rate Mortgages are hybrids of fixed rate mortgages and discounted rate mortgages. A fixed rate is agreed upon by both parties, but if the SVR [standard variable rate] were to fall the customer may pay the lower rate. Increase in SVR is not implemented!
There are other types of mortgages such as current account, offset, cash back, self-certification mortgage etc. You have a wide variety of terms to choose from, seek guidance and select the mortgage that offers the most favourable terms.
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