Top Ten Things to Know About Variable Rate Mortgages

Variable rate mortgages include trackers, discount and capped mortgages

The defining factor for variable rate is that the rate of interest is variable, as opposed to fixed rate mortgages, where the interest rate for fixed rate loans remains same for the entire time period. Here are the things that you should consider if you’re having an idea of getting a variable rate mortgage.

Variable Rate Mortgages

Usually, variable rate mortgages are either linked directly to your bank’s base rate or else it’s linked to your private lender’s SVR (standard variable rate). Mortgages which are linked directly to the base rate are referred as tracker mortgages.

Tracker Mortgage

The range at which most lenders set standard variable rate is approximately two to three percentages above the base rate.

Any changes made to the lender’s SVR or the base rate may cause fluctuations in the interest rate of your mortgage.

The interest rate for variable rate mortgages, which is linked to the lender’s SVR, may not be the same as bank’s interest rate.

For example, if the bank reduces the base interest rate by 0.25% you may find the lender reduce the interest rate only by 0.22%.

Tracker mortgages will usually follow the changes of the base interest rate. If the base rate falls by 0.35 percent, then the rate of interest for your monthly payments may also fall by 0.35 percent

Discount mortgages are also linked to the lender’s SVR but it comes with a discount after a certain time period. Usually, you may have a discount of 2 percent off the SVR for a period of time between 6 months to 3 years. When your discount period gets over, then the rate of interest for your loan would then go back to the SVR.

Base rate tracker mortgages are also referred as tracker mortgages. The banks fix a base rate which the mortgage brokers follow up and sometimes they may even increase the fixed rate with the borrowers.

In other words, variable rate mortgages are having lower fees and no time periods, unless you have a discounted variable rate.

Usually, variable rate mortgages offer more flexibility to the borrowers than any other available type of mortgages as they usually come with the option of overpayments.

If you are having an idea of purchasing variable rate mortgages or any other mortgages then you need to employ a right mortgage broker for comprehensive guidelines as well as to find the best deals that suits your demands at the best

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