Discount
Mortgage
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Us
Discount
mortgages over the last few years have shown to be very popular
in the UK for re-mortgages and property
purchases
as interest rates have generally been quite low and stable.
Though past indications cannot guarantee future trends.
They work by having for a period of time the "discount
period" a set percentage discounted from the standard
variable rate or the bank base rate normally off their standard
variable rate or bank base rate. So if the bank of England
base rate
rise or fall lenders will usually adjust their mortgage rate,
however the agreed discount on the product will apply to the
revised rate until the end of the incentivised period. Then
the rate will revert to the lenders standard variable rate.
For
the discount period early repayment charges usually apply
these may apply for the duration of the discount period or
they might apply for a period beyond this date. Some discount
deals may have steps in them so perhaps for the first year
the discount rate will be very attractive then reduce the
level of discount each year until the end of the total discount
period. Known as a stepped discount. Many lenders for remortgaging
offer free legal costs and valuation though there is generally
a lender's fee which could be charge up front or added to
the home loan on completion.
Discount
deals potentially may help you to reduce monthly mortgage
payments. Discounted mortgage deals aim to reduce the monthly
mortgage payments for a determined period (i.e. the discount
period) thus helping clients with their monthly budget. Caution
should be taken as rates with this product are not protected
from going up.
Though
caution should be taken if the borrow is stretched and could
not afford a rate rise for example a first time buyer if they
decided to move they may find the early repayment charges
high and they may be tied into a deal with an uncompetitive
interest rate for some time. There can also be a high jump
in monthly payments when the discount period ends and reverts
back to the lender's higher standard variable rate.
Tracker
Mortgage
The
tracker mortgage is very similar to a discount deal. The tracker
rate will float above the bank of England lending base rate
at a set rate say for example 0.75% above the bank rate running
exactly inline with it whether it is rising or falling. The
change in rate should be very quickly after the base rate
has changed. Some trackers will be set for the life time of
the mortgage. Many tracker deals can have flexible features
which can be very advantageous to the borrower if used correctly.
But they may also carry early repayment charges.
| THINK
CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST
YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP
UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT
SECURED ON IT.
There may be a fee for mortgage advice, the
precise amount of the fee will depend upon your
circumstances. If a fee is charged it will be
2% of the loan amount payable on completion
of the mortgage, subject to minimum £595.
For example a £100,000 advance X 2% =
£2000.
The Financial
Services Authority
does not regulate some aspects of commercial
finance, personal finances, buy to let and overseas
mortgages.
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FreePhone
0800 781 0414
Amicable Mortgage Services Ltd, 32 Twyford
Avenue, Upper Shirley, Hampshire, UK, SO15
5NP, which is authorised and regulated by
the Financial Services Authority.
Registered office 5 New Broadway, Hampton
Road, Hampton Hill, Middlesex, TW12 1JG, registered
in England No4470987
©2008
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