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Standard Variable Rate mortgage
The basic type of mortgage available from a bank. In theory, as the price of lending is adjusted the lender will vary the price of the SVR to follow these changes, but there will be times when interest rates drop and lenders do not follow in full, or lenders decide to put up interest rates without a matching rise in the base rates.
Advantages – Regularly these are the just type of mortgage that do not have complex and costly tie in periods, but at the moment, with the constant fear that interest rates cannot drop more but may increase in the future, SVRs can have the lowest interest rates on offer and if you need to, you can quickly move to another product.
Disadvantages – Hard to plan as you do not know when nor how much these will vary. They should follow all changes, but banks will not always pass on the whole base rate cuts. For the reason that there are no offers attached, historically these are costly mortgages.
Fixed Rate remortgage
The basic and very common type of remortgage. With this remortgage, for a fixed term of maybe 1, 2, 5 or more years, you and your bank agree the rate at which interest is charged on the advance. It is fixed for the entire length of the agreed period. Generally, the longer the fixed period the higher the interest charge.
Advantages – No matter what happens to interest rates, you know precisely how much you will be paying out. This means you could budget your repayments for the entire fixed period, without any nasty surprises.
Disadvantages – If interest rates drop then you do not see any payback.
Coupon Rate Mortgages
With this you are offered an agreed discount off the lender’s Standard Variable Rate mortgage. You might be offered 1.5 percentage points below their SVR, such as. Once again, the better discount deals are offered for the shorter terms, but you have to watch also how the SVR will track base rate changes.
Advantages – If the SVR reduces, then your mortgage will also follow the reduction.
Disadvantages – They will also rise if the SVR increases. Also, if your lender does not track the base rate changes quickly, then you may not get the full advantages of reductions in the cost of borrowing. If interest rates suddenly increase loads, then you could be in for a nasty budgeting shock, so have to be ready for an increase in payments.
Tracker Rate Mortgages
These mortagages are supposed to track the rise and falls in the base rates, frequently plus or minus a percentage point or two. Every change to the base rate is supposed to be reflected in the mortgage you have.
Advantages – you get all of the SVR advantages, with a coupon built in. It is likely to get a long term tracker, that could ultimately save you stacks of money long term.
Disadvantages – in the current interest rate drops, not all Trackers have followed the base interest rate fully. These will follow any rises in the base rates and might be costly to end early.
Written by Keith Lunt, who owns Finance Blog. For more useful finance talk, call into our Finance Blog.
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Tags: mortgages
Posted in Mortgage · May 20th, 2010 · Comments (0)
It is a common problem these days for people to be unable to meet their monthly mortgage payments and to be facing the problem of having their home repossessed. There is a solution though, and it comes in form of sell and rent back companies. These companies will buy your house from you, and then rent it back it to you at the standard market rental price.
There is no better way to release the equity from your home, whilst still being able to live in it, than by utilizing the services of a sell and rent back company. You can have the cash value of your home in your bank account by the end of the week, and with a minimal amount of disruption. Some of these companies also allow you to buy back your house at a later date, when you have got your finances back in order.
Sell and rent back companies are very discreet in the way that they operate, so there is no need to worry about what your family, friends and neighbors will think about your decision, as they will not even know about it unless you tell them. There will be no for-sale signs outside your property and no adverts in local newspapers saying that your house is for sale.
For most homeowners with serious financial problems, sell and rent back companies provide the perfect solution, but there is a downside to take into account. You will not get the full market value of your house, just 70-90% of it. That might seem like an unacceptable loss to take for some people, especially if properties in their area regularly sell for the full asking price. From the sell and rent back companies point of view though, they are basing their valuation on how much the property could be sold for within a week, not if it was on the market for months.
What you really need to decide on is whether you would be better off getting the highest price possible for your property (waiting possibly months to do so) or making a quick sale (and being able to continue living in your home). If it is the latter option, then you will have no problems finding a sell and rent back company to help you.
The vast majority of sell and rent back companies have websites, so you can check out their credentials easily enough. Once you choose one, a personal representative will be assigned to you who will guide you through the rest of the process. They will answer any questions and queries that you have.
Find Out More – Sell Rent Back
Tags: Finance, mortgages, Real Estate, sell and rent back
Posted in Real Estate · May 16th, 2010 · Comments (0)