We can guide you through the various product options available on mortgages, the pros and cons, and help you decide which one is most suited for your circumstances.
Fixed-rate mortgages offer a stable interest rate for a set period, typically between two and ten years, providing certainty and stability in your monthly payments. However, these tend to have higher interest rates than other options.
Tracker mortgages, which are a type of variable-rate mortgage, have an interest rate that follows the Bank of England’s base rate. Your payments can go up or down as the base rate changes, and tracker rates tend to have lower interest rates than fixed-rate mortgages. On the other hand, you may have less certainty about your payments each month.
Discounted-rate mortgages offer an initial period of lower interest rates, often for two to five years, but your payments can change significantly during this period. It’s important to understand the rate is based on the lender’s standard variable rate, which could change each month, minus the discount being offered.
Capped-rate mortgages offer a variable interest rate that is capped at a certain level. This provides some protection against interest rate rises, but typically comes with a higher interest rate than other variable-rate mortgages.
It’s also worth bearing in mind that, depending on the type of product you choose, it may include an Early repayment charge (ERCs). For example, if you were to take out a five year fixed product and wanted to move house after 2 years, you’d likely have to pay a percentage of the loan as an ERC. This amount decreases the longer you are in the fixed period, so the lowest charge would be in the final year.
Early repayment charges could be avoided by porting your mortgage. Mortgage porting is an option available on many mortgage products, for those who are looking to move to a new property but still have a mortgage on their current home. Essentially, porting allows you to transfer your existing mortgage to your new property, rather than taking out a new mortgage and repaying your existing one. This can be a convenient option if you have a favourable interest rate or want to avoid ERCs.
As a first-time buyer, it’s essential to consider your financial situation and long-term goals when choosing a mortgage. Our mortgage advisers can help you navigate the different interest rate options and find the best fit for your needs.