Mortgage Types and description- Fresh Finance Group- Your mortgage specialists

Your whole of market mortgage specialists

What are Cashback Mortgages?

Cashback mortgages provide you with a lump sum cash repayment when you take out your mortgage. You can use the cashback to help you with any additional costs at a time when your outgoings are likely to be high. These products have now evolved into products that offer free legal fees, valuations and other incentives. Although lenders vary cashbacks, they are usually expected to be repaid if you leave the lender within a certain period of time whereas other incentives such as free legal fees and free valuations are not.

What are Fixed Rate Mortgages?

Fixed rate mortgages are popular options for those looking for a higher level of control over their finances. If you are seeking a mortgage and your finances are stretched to the top of your budget, a fixed rate mortgage provides the security of knowing that your repayments will not change for a set period at the start of the mortgage term. Usually fixed for a period of between 6 months and 5 years, a fixed rate mortgage protects the borrower against interest rate rises during the fixed period, after which time the borrower may switch to the lender’s regular variable rate, or remortgage for a better deal and new fixed-rate period with another lender.

The downside of a fixed rate mortgage is that should the Bank of England base rate drop during the mortgage term, the borrower will not be able to take advantage of the lowered repayment instalments.

What is a Discounted Rate Mortgage?

In order to attract new customers most lenders offer discount rate mortgages, which are an introductory special rate for a set period at the start of a mortgage term. Usually for a period of between 6 months and 5 years, the discount rate will be certain percentage off the lender’s standard variable rate. The discount amount will be dependent on the length of the offer – so a six month discount rate will be at a lower interest rate than a five year discount rate. After the discount rate has finished the borrower will revert to the lender’s standard variable rate, at which time many borrowers remortgage in order to take advantage of another lender’s discount rate mortgage offer.

What is a Tracker Rate Mortgage?

These work in a similar way to Discounted rate mortgages with one main difference. They are designed to track the Bank of England base rate as opposed to the lenders variable rate. This is often seen as a fairer method as lenders do not have to reduce their standard variable rate if the Bank of England reduce rates. If rates go up then the lender often increases their standard variable rate anyway.

What is a Capped Rate Mortgage?

A capped rate mortgage is a mortgage that has it's interest rates capped at a maximum rate of interest, either for a set period of between 6 months and 5 years, or for the duration of the mortgage. It allows the borrower to take advantage of falls in the lender’s standard variable rate in the event of an interest rate drop and gives the security that rates will not rise above a specified percentage rate if interest rates should rise.

The rate at which your interest is capped will depend on the length of the period – a mortgage capped for the life of the mortgage will have a higher cap than a mortgage that is only capped for 1 year but the rate will generally be 1-2% above the lender’s standard variable rate in return for the security of the cap.

So which one is best for me?