Many type of mortgage products are currently available
. Depending on the method of repayment, mortgage products can be of different types. Each of these products comes with its own pros and cons.
Different kinds of mortgages are discussed below:
1) Fixed Mortgage: This is the most used mortgage product. It comes with a fixed rate of interest for a fixed duration of say 2 to 4 years. These are suitably protected from any increase of the rates. You may have to pay foreclosure charges if the loan is paid early.
2) Tracker Mortgage: In this type of mortgage the base rate of the bank is tracked for a particular duration and by some percentage such as 0.70% higher than base rate. If the base rate increases you may have to shell out more. Here there are foreclosure charges for early payment.
3) Variable Mortgage: These are generally opted when a fixed term has come to an end. They are also called Standard Variable Rate (SVR). They are generally fixed at 1-2 % up than the base rate. There are no early payment charges.
4) Capped Mortgage: Capped mortgages come with a preset variable rate which has a cap limit at 7%. With this type of mortgage you have an idea of maximum budget rate. Though it has a disadvantage where you may have to pay charges for early payment of loan.
5) Discounted Mortgage: This mortgage entails some discounts initially on SVR lenders. Like say, for initial 2 years there could be discount of 2 % on the SVR or 7 %.This loan comes with no extra or hidden costs.
Here you may have to pay early repayment charges. The mortgage rates may swing back to SVR lenders after the initial period of discount comes to an end.
6) Flexible Mortgage: These are not available with every lender. These are also called offset mortgages as they usually offset the saving balance or current account against the amount of the mortgage.
7) Cash back Mortgage: These mortgages are specifically made to pay a part of the loan on its completion. These come with variable rates. Early repayment charges apply.