When choosing to finance a home, it is really important to understand how a mortgage works and have an understanding of your financial situation. It is also beneficial to shop around for mortgage so you can get the best deal, or a mortgage that is suitable for your needs.
This table will provide you with some options that are available in the current market place.
| How it works |
Benefits |
Disadvantages |
Fixed Rate Mortgage: An interested rate that is fixed for a certain period and remains constant throughout period agreed. |
Stable and predictable without any hidden surprises. Budgeting can be easier. |
Penalties if you wish to come out of the mortgage. Doesn't benefit you when interest rates fall. |
| Variable rate: An initial interest rate is agreed that will change periodically, usually in relation to the Bank of England rate. |
Interest rates can be generally lower than fixed rate mortgages. If interest rates fall you payments can go down. |
Borrower takes a risk on the rise and fall of interest rates. Payments can be unpredictable. |
| Discounted rate: The interest you pay is set below the SVR for a specific period. |
You can benefit from lower payments |
Future payments may go up also and at the end of the term repayments will increase back to a standard rate. |
