There are several mortgage options available and each has its own pros and cons. So, it’s essential to understand each type before signing on the dotted line. Otherwise, you could end up regretting it for a long, long time.
So in this expert guide, we’ll answer the question of ‘what is a tracker mortgage’ including:
A tracker mortgage is a variable mortgage meaning it has no fixed rate. It usually follows the Bank of England’s base rate, which can fluctuate month to month.
As a result of the fluctuation, your mortgage repayments can vary, meaning you may not pay the same as the previous month.
It’s very important to take your time before committing to a tracker mortgage. This is obviously due to the fact that the repayments can vary, and it’s hard to predict whether they’ll go up or down.
If you are looking at taking out a tracker mortgage, we suggest you analyse your financial situation first.
Tracker mortgages can be most suited to people with a fixed and steady income or those with savings. So, if your income can vary or you don’t work in a stable industry, we suggest avoiding tracker mortgages altogether.
This may save you from defaulting on repayments and the issues that come with it.
If you still feel that a tracker mortgage may be right for you, then there are some advantages compared to other types of mortgages. These include things such as:
Just remember, some of these benefits may not be applicable to you, depending on the lender. So, ensure you understand what’s included and what your rights are before committing.
Finally, enquire whether the mortgage includes a collar rate. A collar rate is where the tracker mortgage rate can’t drop below a certain level. The disadvantage of this is, if the Bank of England’s interest rate suddenly drops, it doesn’t necessarily mean your payments will.
When you have a tracker mortgage, you can usually overpay by as much as you want to. But, it’s worth double-checking this with your lender and seeing what the terms and conditions are first.
For instance, there may be a limit in place or a penalty charge depending on how much you overpay by.
The ultimate difference between a tracker and a fixed-rate mortgage is the interest rate.
With a tracker mortgage, the interest rate can vary from one month to another. Whereas with a fixed-rate mortgage, the interest rate is locked for a set period of time. This means that payments will always be the same, whether interest rates go up or down.
If you’re still undecided whether a tracker mortgage is right for you or just need more information, then call our award-winning team on 0800 32 88 680 today.
One of our expert advisors will be able to answer all of your queries and discuss which options are right for you.
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