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Here is a useful guide to the different types of Mortgage Interest Rates that are available. Mortgage Lenders offer all kinds of different deals when it comes to the interest you pay on your mortgage. Sometimes you may have a choice, sometimes you may not.
Your mortgage is probably the biggest loan you will ever take out, so it is important to get a mortgage with an interest rate that suits you. This will depend on various factors like the type of mortgage selected, your personal circumstances and your plans for the future.
Get independent financial advice before you choose a mortgage. Its an area where youll probably find expert financial advice helpful.
This is another special limited term arrangement where, although your payments can go up and down, they are guaranteed not to rise above a certain level. So you will benefit from interest rate falls during the capped rate period. When the arrangement finishes, you will then pay the lenders standard variable rate.
Once again the interest rate will vary, but you will pay a rate less than the lenders standard variable rate. As you might expect, such beneficial treatment cant last forever and after a limited period of time, you will pay the lenders standard variable rate.
A mortgage where your repayments are guaranteed to stay the same for a limited period of time, usually no less than one year and no more than five years. At the end of the period, you will pay the lenders standard variable rate.
Standard variable rate
A mortgage where the interest you pay goes up and down, usually in line with the Bank of Englands base rate.
Standard variable rate with cash back
Same as above with one difference: the lender will give you a sum of money (normally a percentage of the amount borrowed) as an incentive – the ‘cash back– for taking out the mortgage. This can be especially attractive if you need money to make any improvements to your property.
Here again, your monthly repayment will vary but only by a certain amount. Your interest rate tracks an index such as the Bank of Englands base rate for a pre defined period of time. If, for example, it were guaranteed that you would never pay more than 1% over base rate, this is how it would work. If the base rate were 3%, your interest rate would be 4%; if base rate increased to 3.5%, you would pay 4.5%. Conversely, if the base rate were to fall to 2.25%, you would pay 3.25%.
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About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.
Article Source: EzineArticles.com