Which mortgage type is best for you?

Finding the best mortgage for you can be extremely confusing as there are so many things to take into consideration. First off decide what mortgage type you would like. Below are the different types and what they mean:

Standard Variable Rate mortgages are where "Banks and building societies generally set their own standard variable rates. And they are often the most expensive mortgages available. Right now, the best fixed rate mortgage deals for first time buyers are around 5.3%, according to Moneyfacts. In contrast, the standard variable rate (SVR) for lenders is ranging between 6.5% and 8.5%. That said, there are discounted standard variable rates available which are around 5.9%. If your mortgage moves over to the standard variable rate at the end of your deal, as many do, your outgoings will suddenly increase. And because it’s a variable rate, your lender can also change the SVR at any time. It’s often much better to search for another mortgage deal when your one ends, than to put up with paying the standard variable rate."

This is the opposite of a fixed-rate mortgage. These "are a popular choice because the interest rate is guaranteed to stay the same for the length of the deal. That means you’ll know exactly how much you’ll need to repay each month, regardless of what happens to interest rates. Lenders call this short-term special rate an 'incentive period' and it can be fixed for one, two, three, five, 10 or even 15 years. The interest rates on fixed-rate mortgages tend to go up the longer you fix them for. But for the peace of mind they offer, if you can get a good rate, they can be worth doing."

What about a discount mortgage? This is "where the interest rate is pegged at a set amount below the lender’s standard variable rate (SVR).  They can be set for a period of say, two or five years, or for the whole term of the mortgage.  Discount rate mortgages are currently available for around 3.49%, according to Moneyfacts, making them an attractive proposition right now. But do bear in mind that as with variable-rate mortgages, discount mortgage repayments could change from month to month."

Lastly, we have tracker mortgages. They "'track' the Bank of England base rate"... "but they are usually set higher than the base rate. So you might pay the base rate plus 3% for example"... "Tracker mortgages, like many mortgages, usually have an introductory deal period that lasts around two years. After that, you'd move onto the mortgage provider's standard variable rate."

If you need help finding the best mortgage for you, speak to an independent mortgage advisor who will be able to find the best deal for you across the market. At Evolution Properties we work closely with a local company, so contact us today on 01233 501601 and we can pass you across for a free chat!

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