Fixed Rate

Stability, ability to budget, rate locked - fixed rates offer the security many are looking for. If you’re wanting to know your payments won’t change for a set period of time, then this is the perfect option for you.

Be aware though, most fixed rates do carry Early Repayment Charges (ERCs), meaning you will be tied until your period ends, and therefore may restrict your ability to move or borrow additional funds.

With rates at an all time low in 2021, many who have no plans on moving, are now looking to longer term fixed rates.

Variable Rate

Bank of England base rate trackers, or ‘normal’ variable rates, have the ability to go up, as well as down. For some over recent years, they have benefitted from these types of deals as the BoE base rate was lowered.

A lot of variable rates do not carry ERCs - however their biggest drawback is the inability to predict a financial plan long term.

Variable rates can be good for those with shorter term plans, or looking to move within 12 months for example, as with no ERCs, they allow flexibility to move quickly and not wait for any tie-in periods to end.

Offset

Do you have savings? Are you making 0.1% on these? Are they just sat in your current account?

Offset mortgages are where you place your savings in an account that is directly linked to your mortgage. You will have instant access to these, but for as long as they remain in there, you will not pay any interest on the same value, within your mortgage.

For example, if you have £50,000 in savings, and a mortgage of £100,000 - you can ‘offset’ these savings. As such, you will not earn any interest on your savings, but you will only pay interest on the remaining £50,000 of your mortgage.

So if your mortgage has a higher interest rate than what you get for your savings - THINK OFFSET!

Repayment

A repayment mortgage, or capital and interest as also known, is one whereby you pay back both interest, and the funds borrowed. In turn, by the time your mortgage expires in 20-25 yrs, there will be nothing left to pay and the house will be owned outright.

For the majority, repayment mortgages are the way forward. They symbolise normality and security of knowing the capital is also being repaid.

Interest Only

In contrast to a repayment mortgage, interest only is where you only pay back the interest on your mortgage, and never any capital. As such, on completion of your mortgage in 20-25 yrs time, you will need to still pay back the original amount borrowed.

For some this may seem dangerous, but for others who have a large amount of equity within the property, or significant pension pots, it allows the ability to pay less each month on their mortgage now and increase disposable income for enjoying life.

Part and Part

A mix. A blend. A balance between both.

Part and part mortgages are where you have part repayment, and part interest only.

So if you had a mortgage for £100,000, you may have £70,000 repayment and £30,000 interest only.

Again, these aren’t for everyone, but do benefit some. For example, maybe you wanted interest only but pension pot wasn’t large enough to cover it all. Part and part allows you to still have some interest only, and therefore reducing monthly outgoings now (handy for renovation projects).

SVR (Standard Variable Rate)

You wouldn’t leave the lights on all day, the heating on in the summer, or a tap running, so why would you stay on your lenders SVR?

Standard Variable Rate - is the rate your mortgage will revert to when your initial product/mortgage deal, comes to an end. More and more people are waking up to their ability to shop around 3-6 months before their existing deal ends, in order to secure a low rate, ready for when their existing deal ends.

However, for some, they either forget their deal has ended, or they look to their existing lender, believing they are getting a good deal, without shopping around.

Always take time to access your options, always seek the help of an adviser, and always use Simple Remortgage.