Best Mortgages

Discovering cheap mortgages that make sense

Generally, people are not in favour of acquiring mortgages because of the high monthly costs, but there are certain circumstances that force a person to apply for them. Purchasing a home or land requires a lot of capital and unfortunately most people do not have enough money to pay in full. Therefore, taking out a mortgage is inevitable, but leads individuals to aggressively compare mortgages to receive the best mortgage deals / cheapest mortgages possible.

A mortgage is a loan you can receive by providing your property as security to the lender through an agreement. Before getting a mortgage, you must know about the various types of home loans to help determine what the best mortgages available are. It is also imperative to understand your needs, such as the amount of money you require and whether you want to pay an only interest or repayment type mortgage, etc. A online mortgage calculator is useful in quickly crunching the numbers for you.

Different kinds of mortgages

In the UK, most of the residential mortgages are divided into three main categories: tracker, discount, and fixed-rate mortgages.

Tracker

Generally, a tracker mortgage has a direct link with Bank of England’s base rate movement. In a tracker loan, the interest rate amount is fixed at a rate just above the Bank of England’s base rate. The fluctuations of the increase or decrease of the rate depend on the base rate movements of the Bank of England throughout the term, and according to the fluctuations, the repayments also vary. The benefit of this type of home loan is that it produces cheaper mortgages when compared to fixed-rate versions if interest rates decline. Obviously, if interest rates decrease, one’s monthly payments also become less. The drawback to this type of mortgage is that if the rate increases, the repayments will also increase every month, which can possibly lead to some unwanted financial problems. For this type of mortgage to be the most beneficial, an individual is hoping for lowering rates during the period of the loan.

Fixed-rate

With a fixed-rate mortgage, your interest rate and repayment amount is fixed for the term of the loan. The benefit of the fixed-rate option is that you know the exact amount you have to pay for the whole term, and you won’t have any worries about fluctuations in the base rate. The negative aspect of this home loan is that you will be paying a little more interest when you compare mortgages.

Variable rate

Just like tracker mortgages, the interest rate varies every month. The only difference is that the rates are linked to the mortgage provider’s variable rate, and there is no direct connection with the Bank of England’s base rate. The advantage of this mortgage is that you are receiving the optimal interest rates and your repayment amount is less than it is for other loans. The disadvantage is that you never really know what your next month’s payment amount will be exactly since it varies each month because your bank can change its standard variable rates at any time and for any reason. This makes household budgeting a bit more difficult.

Discount rate

This type of loan is similar to a variable rate mortgage except for the fact that the first few years of it will be at a discounted rate. These tend to be the great mortgages for first time buyers in the UK where the lower monthly repayments will give them a bit of breathing space to budget for it. However, the downside is that the mortgage rate will be a little higher later on to pay off the lending company for the original discount. In addition, there will most likely be clauses in the contract for higher repayment costs if the mortgage is paid up or changed.

Comparing quality mortgages rates

Many lending companies offer multiple products; finding the best mortgages available will nevertheless mean browsing through the various offers. There, you can find mortgages with a variety of competitive interest rates.

Currently NatWest offers both a tracker and fixed-rate mortgage. Nationwide mortgages pretty much include every type detailed above. HSBC offers four types of tracker mortgages with different interest rates. Yorkshire offers a tracker and two types of fixed-rate mortgages. ING Direct has two types of tracker mortgages. The Post Office and the Bank of Ireland UK both offer two types of fixed-rate mortgages. Both tracker and fixed-rate mortgages are offered by RBS. Other prime mortgage lenders include First Direct, Halifax, Abbey, and Northern Rock.

You can easily compare these great mortgages 2012 and more online through our site and select according to your preferences.

This document does not constitute financial advice under the Financial Services and Markets Act 2000. If you require such advice, you should seek appropriate professional advice.