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Other types of mortgages PDF Print E-mail
Written by Real-estate.co.uk   
Wednesday, 02 February 2005

Mortgage type

Pros

Cons

Australian

Weekly repayments

Good if you're paid weekly

Low demand and then disappearing from the British marketplace.

Offset and current accounts

Has become popular.

 

This mortgage lets you use your saving to pay off your mortgage and reduce the interest you pay. For example, if you have a £75,000 mortgage and £20,000 savings, you can pay interest on only £55,000.

Not efficient for only £5000 in savings.

Fixed-rate mortgage

The most popular.

You're protected against interest rate increases for a set period of years. Easy and vey competitive.

High set-up fees. Redemption penalty if you want to change mortgage.

Discounted mortgage

Very popular.

Good if the interest rate is going down.

No rate protection if the interest rate is going up. Redemption penalty if you want to change mortgage.

Capped-rate mortgage

Discounted mortgage and fixed rate together. Note the difference between the Lender's standard variable rate which is 1.5%+ more than the Bank of England base rate.

Excellent if interest rates are falling. Also good if rates are increasing as you can still budget.

The interest rate is a little higher than fixed-rates and discounted rates. As the interest rates are very low right now, you are unlikely to feel the advantage.

Tracker mortgage

Mirrors the Bank of England rateplus or minus 0.5%.

The interest rate is revised each month.

No rate protection, penalty if you opt out.

100% mortgage

Very popular.

No needs for a deposit. Interest rates are not too high.

If the property market goes down, you could be in trouble and exprience negative equity. High mortgage indemnity premium charged by most lenders. Look for those who doesn't charge these premiums and those who offerd 125% mortgages.

Last Updated ( Wednesday, 02 February 2005 )
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