Types of mortgage

Standard Variable Rate
How does it work ?
Your payments can increase or decrease with the lender's own mortgage rate that's usually driven by the Bank of England base rate.
Early Repayment Charges ?
No, not usually, but worth checking.
What are the Pros and Cons ?
· You can normally leave or switch from your lender without being charged.
· You can normally pay in extra money without penalty.
· 'variable' by definition means if interest rates rise, so will your monthly payments.
· Will probably be expensive compared to other deals.
Some lenders might not reduce, or may delay reducing, their variable rate when the Bank of England base rate goes down.

Tracker
How does it work ?
A tracker rate moves up or down, usually, with the Bank of England base rate. It can be initially set above or below the base rate - never the same.
Early Repayment Charges ?
Yes, sometimes during special deals and also afterwards.
What are the Pros and Cons ?
· By choosing a tracker you benefit when the rates gown but you'll pay more if the rates go up. It's best to ensure you'll be able to afford it if the rates go up.

Discounted Rate
How does it work ?
You get a discount on the lender's standard variable rate for a certain length of time. Your monthly payments can go up or down. You normally switch to the standard variable rate at the end of the set period.
Early Repayment Charges ?
Yes, you'll probably be charged during the deal. And sometimes after its ended too.
What are the Pros and Cons ?
· It eases you into starting off a
remortgage but be aware your payments will increase once the discounted rate ends.
· You may not be able to make extra payments or pay off your loan early without penalties. When the Bank of England rate goes down some lenders don't automatically reduce their rates straight away - if they do at all.

Fixed Rate
How does it work ?
Your payments are set at the same amounts for an agreed period.
You'll usually switch to the standard variable rate at the end of the fixed rate period.
Early Repayment Charges ?
Yes, almost always during the fixed rate period - and sometimes after too.
What are the Pros and Cons ?
· You'll have the security of knowing you payments are fixed, even if interest rates go up. But keep in mind that if rates go down, your payments won't. You could be penalised for making extra payments or paying the loan off early.

Capped Rate
How does it work ?
Your payments can vary and are often linked to a base rate, but they are capped and won't go above a certain amount. You are usually moved onto the lender's standard variable rate once the capped rate ends.
Early Repayment Charges ?
Yes, almost always during the capped rate period - and sometimes after too.
What are the Pros and Cons ?
· You'll know what your maximum payments will be for a set period of time. And you'll pay less if rates fall.

Collared Rate
How does it work ?
The opposite to capped - your payments are variable but will not fall below the set 'collar' level.
Early Repayment Charges ?
Not usually, unless the collared rate is used along with a capped rate or a special-deal tracker rate or both.br>
What are the Pros and Cons ?
· If it's part of another interest-rate deal it might appear attractive. But if the rate payable is just above the 'collar' and you think rates will fall, you might not get a fully reduced payment.