Buying a home

What’s involved?

Your home may be repossessed if you do not keep up repayments on your mortgage.

A fee of up to £1,250 or 2% of the loan amount, if greater, is payable on application. For example on a £100,000 mortgage, this would be equate to a fee of £2,000. An administration fee of £249 is included within our fee. We will also receive a commission from the lender.

Before you choose a specific deal, you may want to understand more about what types of mortgage are available. This brief summary may help.

Types of mortgages

Explore the different mortgage options available to you.

Variable Rate

Your monthly payment fluctuates in line with a Standard Variable Rate (SVR) of interest, set by the lender. You probably won’t get penalised if you decide to change lenders and you may be able to repay additional amounts without penalty too.

Many lenders won’t offer their standard variable rate to new borrowers.

Discounted Rate

Like a variable rate mortgage, your monthly payments can go up or down. However, you’ll get a discount on the lender’s SVR for a set period of time, after which you’ll usually switch to the full SVR. Discounted rate mortgages can give you a gentler start to your mortgage, at a time when money may be tight. However, you must be confident you can afford the payments when the discount ends and the rate increases.

Fixed Rate

The rate stays the same, so your payments are set at acertain level for an agreed period. At the end of that period, the lender will usually switch you onto its SVR (see Variable rate). You may have to pay a penalty to leaveyour lender, especially during the fixed rate period. A fixed rate mortgage makes budgeting much easier because your payments will stay the same – even if interest rates go up. However, it also means you won’t benefit if rates go down.

Tracker Rate

Monthly payments fluctuate in line with a rate that’s equal to, higher, or lower than a chosen Base Rate (usually the Bank of England Base Rate). The rate charged on the mortgage ‘tracks’ that rate, usually for a set period of two to three years. You may have to pay a penalty to leave your lender, especially during the tracker period. A tracker may suit you if you can afford to pay more when interest rates go up – and you’ll benefit when they go down.

Important information

This article (Buying a home) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Centrad Limited on 01922 745400 or email enquiries@centradltd.com and we will be happy to assist you.

Article expiry: 06 April 2023