|
Fixed Rate Mortgage
Variable rate mortgage
Capped mortgage
Discounted Rate
Tracker Rate
Cash back mortgage
Flexible rate mortgage
Offset Mortgage
Libor Mortgage
CAT mortgage
Fixed Rate
This fixed rate mortgage scheme allows the borrower the budget
certainty for the period of time. There is often an arrangement fee and there
may be early repayment charges if the loan is repaid in full or part during the
fixed period.
(back to the top)
Variable Rate
A variable rate mortgage or floating rate mortgage is a mortgage loan
where the interest rate varies to reflect market conditions. The interest
rate will normally vary with changes to the base rate of the central bank and
reflects changing costs on the credit markets.
(back to the top)
Capped Rate
A capped mortgage is similar to a fixed rate in that it will not rise
above a pre-set rate, known as the cap. However if the lenders standard
variable falls below the capped rate your rate will fall in line with it. If the
lenders variable rate rises above the capped rate your rate will not rise above
the capped rate.
(back to the top)
Discounted Rate
The discount mortgage simply offers a discount off the lender's
standard rate for a given period and is designed to attract new mortgage
business in the same way as a fixed rate product.
(back to the top)
Tracker Rate
Tracker rate mortgage schemes follow movement in the Bank of England
base rate at an agreed differential. The Tracker rate mortgage is
available for a fixed period or the life time of the loan. The most common
tracker rate period is 2 years, though mortgage lenders now offer 3 year, 5 year
and even 10 year track rate mortgages.
Cash Back
A cash back mortgage is one where a cash lump sum is paid to the
mortgage applicant on completion of the mortgage. There are two main ways
a cash back mortgage can be offered by a mortgage lender.
(back to the top)
Flexible Mortgage
Flexible rate mortgage schemes allow you to overpay and underpay
without redemption penalties being charged. You can tailor your current
financial situation to the mortgage payments that you make. When you have spare
cash you can overpay and if necessary you can underpay, skip a mortgage payment
or even borrow money against the capital repaid.
(back to the top)
Offset Mortgage
Lenders normally set a credit limit at the outset of the mortgage and allow
borrowers to credit and redraw up to this limit and this limit may be
periodically reviewed. The lender may place restrictions on the lending limits
towards the end of the mortgage term with the aim of ensuring capital repayment.
However many lenders allow full drawdown up to the end date of the mortgage
where the loan must be repaid. This can cause great problems for undisciplined
borrowers and those approaching retirement if the lender is unwilling to extend
the term especially on the grounds of age.
(back to the top)
Libor Mortgage
Libor mortgage ,like the majority of mortgages on the market track a rate.
Unlike the majority of mortgages that track the Bank of England base rate, Libor
mortgage track the London Inter Bank Rate. These lenders, mainly
sub-prime and self-cert lenders track LIBOR (the London Inter-Bank Offered
Rate), the rate at which banks lend money to each other in the money markets.
Most LIBOR mortgages track three month LIBOR.
(back to the top)
CAT Standard
A CAT mortgage is one that meets a number of government defined
standards relating to 'Charges, 'Access and 'Terms. According to the
Treasury, the objective of CAT standards is to 'prevent confusing marketing and
hidden charges'. The Government is seeking to set out basic and transparent
conditions for mortgage products. CAT standards don't apply to all
mortgages. They are voluntary, so mortgage lenders don't have to use them yet.
(back to the top)
| 