Severnside Mortgages

Types of Mortgage Products

Continuing from our considerations page, here we start to explain the different types of mortgage products on the market today along with their pros and cons.

Variable

  • Standard Variable Rate (SVR). You always pay the lenders current rate and there are no hidden charges
  • You may benefit from rate reductions
  • Unlikely to incur arrangement fees or early repayment charges (ERC'S)
  • This is typically the rate you end up on after your arranged rate eg fixed, tracker etc
  • Budgeting can be more difficult
  • You are not protected from interest rate increases

Fixed

  • You have a fixed rate for a fixed period
  • You are protected from rate increases
  • You know how much each monthly payment will be for the agreed term making budgeting easier
  • There maybe ERC's
  • You will not benefit from interest rate reductions

Capped

  • You know your maximum interest rate
  • You can budget knowing what your maximum cost may be
  • You may benefit from interest rate reductions
  • There maybe ERC's
  • Usually a higher interest rate than those of a comparable fixed rate

Discounted

  • Offers a true saving and no hidden charges
  • You may benefit from interest rate reductions
  • Possibly won't have to pay an arrangement fee
  • There maybe ERC's
  • Your rate will increase back to the lenders SVR at the end of the product

Flexible

  • Flexibility to increase or decrease your monthly payments throughout the term
  • Offsets your current account balance against your mortgage to lower interest paid
  • Option for payment holidays
  • Option to reduce loan by making lump sum payments
  • Ability to release capital in your property
  • Usually arranged on a variable rate basis
  • May find it difficult to budget

Cashback

  • A percentage of your loan as a lump sum
  • Cashback paid on completion or shortly afterwards
  • Usually linked to a variable rate
  • May find it difficult to budget
  • ERC's applicable
  • Cashback must be repaid if mortgage is redeemed within ERC period.