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Tracker and Discounted Mortgages

Tracker and Discounted mortgages and remortgages

Whichever type of mortgage is selected, the lender will charge interest and there will be an overall cost to the borrower. The cost of borrowing will vary depending upon the requirements of the lender; for example, there may be a setting up fee, administrative fee, reservation fee and usually there will be valuation and legal fees to be met.

Tracker Mortgages link the rate of interest to the Bank of England Base Rate and are usually set at 1% above the Base Rate. The advantage is that the rate is variable but the lender cannot widen its margin in the future. In addition there will be a requirement in the contract that the lender match any changes in the Bank of England base rate within a fixed time period.

Discounted interest loans are similar to the above except that the unpaid interest over the short-term is not added to the outstanding loan. This rate is a true discount to the variable rate and not just a deferment of payment. If a lender changes its standard variable rate the change will impact immediately on discounted mortgages. Administration fees are usually charged and a redemption penalty may apply if the loan is repaid early, which may involve an extended 'tie-in' period, as with fixed rates.

This may all seem very complex but don't worry use a mortgage broker with experience can be invaluable in helping you to navigate through the different lenders and deals. A good mortgage advisor knows all the processes involved and can help you through each step.

Other type of mortgages you can consider are Capped Rate, Cashback, Offset, Fixed Rate Mortgages.