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- If you don't ask … the secret remortgage rates for special customers
Your rate can change at any time, even if the Bank of England's base rate does not change. Much like the standard variable rate mortgages, capped rate mortgages offer you the bank's standard variable rate of interest, with one exception — your rate will have a cap.
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This ensures that the rate cannot go above a certain amount. This sounds like a great plan in theory, but the way mortgage payments work is that you will always find a catch or an issue that does not always align with your personal circumstances. One key disadvantage to a capped rate mortgage is that banks will improve their chances of making a profit by starting off with a higher than usual standard variable rate, which is normally higher than others or fixed rate mortgages.
Secondly, caps tend to be quite high, so it's unlikely that the Bank of England bank rate will go above it, and unlikely that another bank's standard variable rate would go that high. Finally, the bank, just like with other standard variable rate mortgages, is able to adjust the rate at any time. They can do this up to the cap, so don't look at the cap as simply a protection against higher interest repayments, but rather as the maximum you might have to pay each month.
Similar to fixed rate mortgages, discount mortgages offer an introductory deal. The main distinction is that the introductory offer on a discount mortgage can still be changed during the deal's term. A discount mortgage is essentially a standard variable rate mortgage with a discount offered usually for the first two or three years of the mortgage. It's important to not only look at how deep the discount is, but what the overall rate is being offered. Shop around and compare before deciding on any discount mortgages.
This means you get a discount for the first two years, but will have to pay a higher rate afterwards. One added benefit is that if the bank or lender cuts its standard variable rate — this could happen if the Bank of England base rate falls — then your introductory deal could be even lower, as would your standard variable rate thereafter. Similarly, the uncertainty of a standard variable rate mortgage can be a disadvantage, with rates likely to go up if the bank rate goes up.
Even your introductory discount deal is not at a fixed rate, so that too could go up at any time. You should also watch out for charges if you want to leave during your introductory deal.
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If you want security over how much your monthly mortgage payment will be, variable rates can be difficult to budget with and may not be ideal in such a scenario. If you're unsure about taking on a fixed rate mortgage deal but you're still asking yourself, 'how much will my mortgage payments be? Tracker mortgages are almost exactly like standard variable rate mortgages, except that the standard rate provided by the bank will only change in line with the Bank of England's rate, and not due to any other circumstances.
A standard variable rate mortgage will usually change according to the Bank of England's interest rate, but it can also do so whenever it feels like. With a tracker mortgage, you are guaranteed that the rate will only track the rate of the Bank of England. This rate is usually a little higher than what the Bank of England's base rate is, so it will still be roughly around the same price of a standard variable rate mortgage, but with the peace of mind that it will only change with the base rate's activity.
Offset mortgages, or current account mortgages as they're sometimes known, link your bank account to your mortgage. Some offset mortgages only link to your current account, while others link to both your current account and savings accounts. Offset mortgage interest rates can be on fixed rate deals or a range of variable rate offers too. If you are buying a home for the first time, you may need a little extra help to get a mortgage, and this is where first-time buyer mortgages come in. Most mortgage providers offer mortgages specially designed for first-time buyers.
These mortgages usually allow you to borrow more than other mortgage types. These mortgages cater to those with lower deposits, but in the long run they obviously work out more expensive than if you had a higher deposit.
If you are a first-time buyer then try to keep saving up your deposit, as each extra bit of cash you can give up front will reduce your mortgage's monthly payments. There is also a range of government schemes to help first-time buyers.
See our guide to Help to Buy and keep an eye out for any government announcements about schemes to help first-time buyers. A second mortgage, or a remortgage, can help you pay off your existing mortgage and give you extra flexibility, especially if the new mortgage gives you a better deal. If, for example, you're on a fixed rate mortgage deal and it's now coming to an end, you may want to remortgage with a deal that continues to keep your interest rates low.
Even if you're not sure about remortgaging it makes sense to check the remortgage market every now and again.
It takes a month or so for a remortgage deal to go through — and interest rates and your own circumstances can change quickly, so it's best to be prepared. Use our comparison tables to look at the top remortgage deals on the market. You can get a better deal the higher the equity in your home is — this is essentially how much of your current mortgage you have already paid off. See our guide to remortgaging to get a better idea on whether or not a second mortgage could work for you.
Buy-to-let mortgages are designed to allow you to buy a property for the purpose of getting a tenant to rent it out.
These mortgages factor in the income you will get from rent, and usually work on an interest-only basis. See above for our explanation of interest-only mortgages. The biggest thing to consider before taking out a buy-to-let mortgage is how much commitment you can give to becoming a landlord. Is it something you can handle?
How much commitment can you give? Treat it like a business venture first and foremost. See our guide on how to become a buy-to-let landlord for more information. If you have a lack of credit history, you may still be able to get a mortgage. Even if you have a less than perfect history, you may still be able to get a mortgage, however your options are likely to be much more limited and you may have to pay more to lower the risk factor for the mortgage provider.
A lack of credit history means that you don't have any or much record of paying bills or debts. To give yourself more of a credit history it might be worth putting your name to a few utility bills at home or even taking out a credit card and paying back those bills — this will soon show up on your credit report and indicate to lenders that you have a credit history. If you have a bad credit history — from missed payments, defaults, etc — then it's generally better to avoid applying for any extra credit until you've taken some time to pay off any outstanding debts first.
It is still possible to get a mortgage with a less than perfect history and if you think you do have poor credit, then take a look at our guide to getting a mortgage with bad credit. Before you take out mortgage protection insurance, ask yourself if you really need it. No doubt, if you lose your job or fall ill and are.
Do you have a spouse or any family members able to help cover bills for a few months in the event of being unable to pay your mortgage? Before taking out mortgage protection insurance, look at all your back-up plans and weigh up how effective they might be in each scenario.
If you don't ask … the secret remortgage rates for special customers
If you still feel mortgage protection insurance is worth having as a safety net, then make sure you compare mortgage protection insurance policies effectively. Some policies may be absolutely pointless depending on your personal circumstances, so weigh up what the right cover for you is.
Prices vary depending on how much of your repayments you want covered, your general health and well being, as well as your age and medical history. There are many other factors at play when comparing mortgage protection insurance so read our guide to learn more. To compare mortgages, see our tables and find out if you can get a decision in principle today! In simplest terms, most fixed rate mortgages will give you the same rate of interest on your repayments for two to five years.
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Essentially, it is more of an 'introductory offer' in the world of mortgages. However, as with many offers, they can be too good to be true, so it's important to look out for other factors before going for a fixed rate mortgage. A fixed rate mortgage can be good if you are looking to start off your mortgage repayments knowing that they will be the same amount every month for the length of the mortgage offer this will be around two to five years long. This is the peace of mind option, but it can also work out better value in the long run too.
For example, if the Bank of England base rate looks set to go higher over the next two to five years, then a fixed rate mortgage can help 'lock in' that low rate before it has a chance to increase. However, there are some disadvantages to a fixed rate mortgage deal too.