When you’re looking to purchase a property, one of the most important choices you’ll make is which type of mortgage to opt for. Typically, it is a case of deciding between a Tracker Rate mortgage and a Fixed Rate mortgage. This is a very important decision as either option has its benefits and drawbacks depending on your financial circumstances and future goals.
A Tracker Rate mortgage has an interest rate that can fluctuate. This fluctuation is usually based on the Bank of England’s base rate, which can increase or decrease up to 8 times per year. Tracker Rate mortgages can change for many reasons, for example, changes in the economy or adjustments to the Bank of England’s base rate.
• Flexibility: Some lenders will allow you to overpay on your monthly payments without facing a penalty.
• Decreased repayments: If your lender decreases their interest rates, your monthly repayments can decrease too.
In contrast, a fixed rate mortgage, your interest rate remains the same for the length of your mortgage deal, typically 2 to 5 years. This means, irrespective of what happens in the market, your fixed rate will not change during this time.
Knowing the difference between these two types of mortgages is crucial because it affects your financial future. Here’s why:
Budgeting: If you require stable, predictable payments, a fixed rate might be the right option for you. But if you can afford potential increase in payments whilst looking for the chance to save when rates fall, a tracker rate mortgage could work for you.
Future Plans: If you plan to move on from this property soon, a tracker rate might offer more flexibility when it comes to exit fees.
In conclusion, choosing between a tracker rate and a fixed rate mortgage depends on your personal financial circumstances. It is worth asking yourself: do you prefer the certainty of a fixed rate, or are you willing to take a risk on a tracker rate for potential savings?
Understanding these differences is key to picking the right type of mortgage for you and ensuring enjoyment in your new home without any unexpected and unwanted financial bumps.
Talk to one of our mortgage and protection advisers today!
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 11.06.2024
The Mortgage Society is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Most Buy to Let mortgages are not regulated by the Financial Conduct Authority.
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The Mortgage Society is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority. Just Mortgages Direct Limited Registered Office: Colwyn House, Sheepen Place, Colchester, Essex, C03 3LD. Registered in England No. 2412345
Approved by The Openwork Partnership on 09/02/2024
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