These mortgages are a type of variable rate mortgage with an interest rate linked to the bank of England base rate. The level of the margin above base rate along with fees and other terms varies from lender to lender along with the associated fees and terms.
When interest rates are unpredictable this is not a type of mortgage product we would normally recommend to our clients as it does not presently give financial security in an uncertain time. However, when rates are more steady this type of mortgage can prove to be more economical.
Variable rate mortgage
This type of mortgage is similar to that of the tracker mortgage however, the interest rate followed is that of the lender. It is the lender’s default rate and generally more expensive than a tracker product. Each lender has its own standard variable rate (svr) which if you had a fixed rate mortgage and you came to the end of the term you would roll onto the lenders standard variable rate unless you opted to re-mortgage/switch to a new product beforehand.
The main positive with this type of mortgage is that you have the freedom to redeem the mortgage with no early repayment charges so it could be appropriate for a shorter term mortgage.
Discount mortgages are essentially a type of variable rate mortgage product. Whereby they offer a discount on the lenders standard variable rate for a set period usually with a penalty to be paid if the mortgage is redeemed before the end of the scheme period.
Whilst these discount products can seem attractive, the lender is free to increase its standard variable rate at any time, thereby increasing your monthly mortgage payments.
A re-mortgage is when you move your current mortgage to another lender and change to a new mortgage deal. When you re-mortgage you have the option to increase or decrease your borrowing and to change the term of your mortgage. You can also use this opportunity to change the type of mortgage you have and the term you wish to fix for depending on your situation.
An alternative to re-mortgaging would be to switch your mortgage deal to a new deal offered by your current lender. This is called a product transfer. This approach is very attractive to a great majority of our customers as we can source the best product offered by their current lender and switch it for them without the need for a whole mortgage application. We can also check the mortgage market as a whole before doing so to ensure that there isn’t a much better deal offered by another lender that would make a re-mortgage away to another lender a more attractive proposition.
Another benefit of a product transfer would be if your circumstances have changed such as being recently self-employed which would make re-mortgaging to another lender impossible without at least a year’s proof of income through tax calculations and overviews. It is always best to be completely honest about your current situation and we will find the best way forward for your circumstances.
Let to Buy
A let to buy mortgage is the term used to describe re-mortgaging the property currently occupied and mortgaged on a residential basis to a Buy to Let mortgage where the property is to be let.
You will then get a new residential mortgage for the home you are purchasing and moving into. With this let to buy mortgage and the new onward residential mortgage this needs to be a simultaneous transaction. We would source you your let to buy mortgage for your current property and your new residential mortgage for your onward purchase.