Remortgages  Other Types of Remortgage

Remortgages

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Alternative Remortgage Types

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Tracker Mortgage: The interest rate directly follows the Bank of England Minimum Lending Rate. This means that you are not dependent on the whim of the mortgage lender as to when its Standard Variable Rate (SVR) changes. Many financial institutions raise their mortgage rates immediately when the Bank of England raises its rate, but are much slower to follow when the rate falls.

Cashback Mortgage: This type of mortgage is usually charged at the SVR. It offers a cash lump sum to the borrower when the mortgage is taken out, which is useful if the borrower needs money to put towards a deposit, towards furnishing the property or has debts to repay.

Droplock Mortgage: A droplock mortgage is a type of tracker or discounted mortgage which includes the option to switch to a fixed rate mortgage, without penalty, during the initial term. This option is advantageous to the borrower if mortgage rates rise during the initial term of the mortgage.

Extra Mortgage Features
Besides the different ways that monthly repayments can be calculated, many mortgages incorporate additional features that are useful to some borrowers:

Flexible Mortgage: Subject to agreement with the mortgage provider, monthly repayments can be varied depending on the borrower's financial situation at the time.

Many financial institutions will allow overpayments (which will reduce the overall length of the mortgage term). In addition, some mortgages include options to allow:
Bullet Point one-off lump sum payments;
Bullet Point underpayments;
Bullet Point payment holidays.

Borrowers who take advantage of underpaying or taking payment holidays should note that interest will continue to accrue. Consequently, higher repayments might be required later in the mortgage term; alternatively, the length of the mortgage term could increase.

Offset Mortgage: A flexible mortgage enables the borrower to offset the amount held in a current account or a savings account (with the lender) against the outstanding mortgage account. The amount of interest owing is calculated daily, based on the difference between the outstanding mortgage balance and the sum held in the linked account.

Current Account Mortgage: This type of flexible mortgage product is, in effect, a combined current account and mortgage account. Interest is calculated on the daily balance, so the overall amount of interest owed will depend on the amounts of money paid into the account and the amounts withdrawn.

Offset and current account mortgages will suit many borrowers who wish to make overpayments irregularly, when circumstances permit.

Summary
Bullet Point Tracker mortgages follow the Bank of England Minimum Lending rate:
Bullet Point interest on cashback mortgages is usually charged at the lender's SVR;
Bullet Point interest owing on offset and current account mortgages is calculated on a daily basis.

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Typical Interest Payments

First Time Buyers

2.89%

Purchased Fixed

2.89%

Discounted Rate

2.99%

Buy To Let

2.99%

Commercial

3%

 

 

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