What is a Fixed Rate Mortgage?

As the term implies, with a fixed rate mortgage the mortgage rate is fixed for a set period of time, so no matter what movements occur in the lender's standard variable mortgage rate, the borrower's arrangement is fixed and, therefore, so are the monthly fixed rate mortgage payments.

A fixed rate mortgage would suit someone who likes to know where they stand. A fixed rate mortgage, as suggested by the name, is a mortgage where equal repayments are made every month.



Fixed rate mortgages allow you to easily manage and plan your monthly expenditure - because the payment will be the same every month and you won't be affected by any rises in the base rate. If the interest rates rise above the fixed rate on your mortgage, you will see the real benefits of the fixed rate mortgage.

A fixed rate mortgage makes it easy to plan ahead, because as the name suggests, the interest rate on your mortgage stays fixed.



This means that as a fixed rate mortgage customer, even if the Bank of England Base Rate changes, the interest rate on your mortgage remains constant over a fixed period of time. This makes your budgeting easier, because you can plan ahead knowing exactly how much your monthly repayments will be.

The fixed rate period can be anything between six months and five years, but it's always best to refer to a financial services professional before deciding what period of fixed interest rate to choose.



The biggest advantage of a fixed rate is that irrespective of fluctuations in interest rates, your monthly repayments remain the same throughout the period of the fixed rate - usually six months to five years.

A fixed rate mortgage is suitable if your mortgage repayments take up a large proportion of your income as it protects you from rises in interest rates. However, you would not benefit from any reduction in the lenders standard variable rate.

Fixed rate mortgages generally incur a penalty if redeemed within the fixed rate period.



The advantage of a fixed rate mortgage is that you know exactly how much your mortgage will cost, and for how long. If interest rates on your mortgage rise, well the fixed rate will not. Conversely, however, when mortgage rates drop, your fixed rate mortgage will not drop with them.

The key benefit of a fixed rate mortgage is that you are able to accurately budget your repayments for a set period of time.



In addition, fixed rate mortgages are an excellent option, if it becomes apparent that interest rates may be rising over the coming years, as you can protect your mortgage repayments against rises by choosing a fixed rate mortgage.

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The Offset Mortgage - Why Is It Growing In Popularity?

The biggest innovation in the mortgage market in recent years,

the offset mortgage, is now starting to take a significant share

of the market. Now, only six years after they were introduced,

the offset and the current account mortgage account for 10% of

all borrowed mortgage capital.



According to one of the UK's largest mortgage lenders, as many

as 25% of existing mortgage holders could save money in the long

run by choosing an offset mortgage.



If you're one of those

possible 25%, then it's important that you are aware of the

facts.



What exactly is an offset mortgage?



Here's the concept: you borrow capital from the mortgage lender

and you also have savings sat in another account. Instead of

paying interest on your full loan and earning interest on your

savings, you pay interest on the amount you borrowed minus the

amount you have saved. For example, if you had ฃ25,000 savings

and a mortgage of ฃ110,000, you would only pay interest on the

sum total of debt, which would be ฃ85,000.



Your savings would

not earn any interest on a separate level, they would only be

linked to the mortgage.



So what's the big selling point?



The major advantage to this kind of mortgage, particularly where

higher tax payers are concerned, is that you end up paying less

interest. This transpires because you are not earning interest

on the savings, and as you know, the taxman always takes a fair

amount of that interest away from you. If you have significant

savings, then you lose a lot to the taxman - but not with the

offset mortgage.



That's why this type of mortgage is so well

suited to people that have to pay over 40% tax.



These calculations illustrate the potential savings:



ฃ100,000 mortgage - 25 years



Interest rate - 4.69%



ฃ20,000 deposit



Traditional mortgage interest payments - ฃ85,351



Offset mortgage interest payments - ฃ41,998



Saving - ฃ43,353



With the offset mortgage you would also complete the mortgage

after just 19 years and 4 months.



This is because the monthly

repayments are calculated without your savings being included in

the equation - therefore you would overpay, and finish paying it

off early.



On average, a standard rate tax payer could feasibly save ฃ9,538

in tax and a higher rate taxpayer a considerable ฃ17,341.



There's also the benefit of flexibility - the offset is a lot

more forgiving than the traditional mortgage and you can

overpay, underpay and take payment holidays without penalties.



If it's that great, why isn't everyone doing it?



Offset mortgages used to have high interest rates, putting many

borrowers off at the first hurdle.



But as this type of mortgage

has started to take off, lenders are offering better and more

competitive interest rates.



The interest rate is however, still considerably higher than

with the fixed rate mortgage for example, and it's important

that anyone considering an offset mortgage can be sure that the

tax savings will cover the higher interest charge. It's the kind

of calculation that can only be accurately provided by a

professional mortgage adviser.



As a rule, the standard taxpayer must have savings of ฃ20,000 to

put against a ฃ100,000 mortgage to make the offset worthwhile. A

higher rate taxpayer would only need ฃ10,000 to justify this

type of mortgage. (These calculations were made in reference to

an average 4.69% fixed offset rate, and a 4.49% tracker

mortgage.) These figures will obviously change with the

potential rise and fall of interest rates, and as we project,

offset and traditional mortgage rates move closer together.



The many variations on the offset mortgage



Mortgage lenders, in their bid to win your business, offer

different incentives that they hope will give them the

competitive edge. The most common incentive is a free property

valuation or free legal work. The banks have a head start as

they can include your current account in the offset calculation

as well as your savings, but other lenders will let you offset

two different savings accounts. Others will offer a borrowing

facility and a chequebook.



The interest rate also varies considerably - from a 6-12 month

fixed rate, to a tracker guaranteed to stay below the base rate

for 6 months, or a tracker which tracks the base rate for a set

amount of years, but also charges a minimal premium.



The amount you are borrowing compared to the value of the

property will also affect the interest rate. At the moment one

lender will give an interest rate of 5.6% for people that are

borrowing less than 50% of the property value, whereas anything

above that (up to 99%) will have an interest rate of 6.



45%.



The concept may be easy for you to get your head around, but the

sums won't be. See an independent mortgage adviser for

individual advice tailored to your circumstances, it's the only

way to be sure that the offset is best for you. However, we

think that if you have savings and pay interest at a higher

rate, you'll be onto a winner with the offset.



*Indicative figures correct as at 11/05

Best Buy to Let Mortgages

Are you searching for the best buy to let mortgages with the everyman ante payable? Allegation to account repayments on-line? Not abiding how abundant you can borrow? These are all questions that you may able-bodied be allurement yourself if you are searching for the best buy to let mortgages.

Finding the appropriate buy to let mortgage is acute to your success as a acreage investor. Unlike added forms of investment, a lot of the money you put into a buy-to-let acreage is acceptable to be borrowed.



Over the endure few years, the buy to let mortgage bazaar has boomed, and borrowing money to advance in this way has become easier than ever. There are a bulk of altered buy to let mortgage articles accessible from anchored rates, discounted capricious rates, discounted ante and so on. Altered articles may be acceptable for altered investment properties. Award the cheapest buy to let mortgage may not consistently be the best advantage so there are a bulk of things to accede if chief which buy to let mortgage is best.



For example:

- A lender may action a actual bargain buy to let mortgage artefact which may backpack a actual adorable bulk for a abbreviate while, but attending at the baby print. If you are again angry in for an continued bulk of time at a abundant college rate, again you allegation to account whether or not this is the best buy to let mortgage for you in agreement of your cashflow as a landlord.

- A anchored bulk with no continued tie would accredit you to apperceive absolutely what your account repayments are so that you can account your profit/loss for that set anchored term.



- A discounted capricious bulk can be actual adorable if the abject bulk is in the favour of the freeholder and buy to let investors. Account repayments will alter according to the decrease/increase in the abject bulk or LIBOR rate.

- Some of the best buy to let mortgage articles may be discounted capricious bulk articles that aswell action the advantage of a droplock facility. A droplock adeptness on a buy to let mortgage agency that for a fee, you can adjudge to about-face to a anchored bulk with that aforementioned lender.



How Do I Apperceive How Abundant I can Borrow

This will depend on the lender and the buy to let mortgage articles accessible as this can vary. Some lenders may set minimum bacon levels admitting others may allegation analysis that you are an accomplished acreage investor. Others may not be anxious with the akin of assets accouterment that the rental assets is sufficient. In general, a lot of lenders will account the best borrowings based on either 125% or 130% cover. This 5% can accomplish the aberration as to whether you can borrow the abounding 85% or less.



The hire that a freeholder receives about has to be either 1.25% or 1.3% added than the absorption transaction of the mortgage. For archetype if you were searching to acquirement a buy to let acreage at ฃ100,000 the best accommodation you could accomplish is 85%. Assuming an absorption bulk of 5% this would accomplish the absorption alone account claim of ฃ355. Therefore the rental assets that can be accomplished accept to be ฃ443. This bulk getting 1.25% times the rental amount.



To get an abstraction of how abundant the account repayments would be on a buy to let acreage you are because again its account aggravating an online buy to let mortgage calculator to plan out the repayments immediately.

However it is actual important that you get the actual advice with your finance. Questions that are account because if award the best buy to let mortgage:

1. Do they accept admission to lots of altered articles in the bazaar place?

2. Do they accept the adeptness to actualize a continued appellation acreage development action for you?

3.



Are they able to defended Absolute Products?

4. Are they able to align mortgages aural 10 alive days?

Most lenders will action a best accommodation of 85% adjoin a buy to let acreage acute you to armamentarium at atomic a 15% deposit. But this does depend on the rental assets that can be accomplished from the investment property. The buy to let mortgage industry is actual aggressive with new articles getting launched on a actual approved abject so it is account befitting an eye on the best deals around.



Some brokers may allegation a allowance fee up to 2% to align the accounts for you but don't let this put you off because if they do accept the adeptness to defended absolute articles for you, it could be actual benign to your cashflow as a landlord. Plus, if they are able to adeptness academic mortgage action date in a actual abbreviate amplitude of time, this could aftereffect in you getting able to defended acreage at actual aggressive prices if you accept the adeptness to acquaint the bell-ringer that you can accept the accord completed aural a amount of a few weeks.



Buy to Let Mortgage Types

Variable bulk buy to let mortgages

This is the lender's own mortgage bulk and one that is accountable to change whenever the lender chooses which is at the aforementioned time of abject bulk changes. This agency that if you are on a lenders accepted capricious bulk buy to let mortgage artefact again your account repayments will access or abatement appropriately although they actual rarely canyon on the abounding allotment abridgement to the client.



This blazon of artefact does aswell acquiesce the lender to change the bulk even if there is no change in the Bank of England abject rate. So if you are searching for something a bit added acceptable why not attending at your added options.

Discount buy to let mortgages

For a set period, the lender offers a abridgement on its SVR (standard capricious rate). Let's say, it ability action a abatement of 1.5 per cent over three years. However abundant the SVR (standard capricious rate) increases or decreases during the abatement period, you consistently pay a bulk 1.



5 per cent lower.

Stepped Abatement buy to let mortgages

Its aswell account because stepped abatement buy to let mortgages, area the akin of the abatement reduces afterwards a set period. For example, you may be offered a 1.5 per cent abatement for a year, followed by a 0.75% per cent abatement for the additional year.

Fixed-rate buy to let mortgages

Regardless of the (SVR) accepted capricious or changes in the abject rate, this affectionate of buy to let mortgage offers a anchored absorption bulk for a set period.



The account mortgage repayments will abide the aforementioned giving the acreage broker the ability of what their account outgoings will be for a set term.

Capped-rate buy to let mortgages

The capped-rate buy to let mortgage offers a absolute as to how top the absorption bulk can go. The bulk you pay can move up and down beneath that akin but never go above it. Your payments would abate if there were any abject bulk decreases.

Drop-lock buy to let mortgages

This is a affection that is included in some buy to let discounted mortgages.



Initially you adjudge to opt for a discounted artefact but for a baby fee you accept the advantage to bead into one of that lender's anchored bulk products. At which time you would again be apprenticed by the agreement of the new anchored bulk product.

Tracker buy to let mortgages

Tracker articles can be a acceptable advantage for buy to let investors. Tracker articles action a allowance over the abject bulk for assertive periods of time. Some will action a buy to let tracker artefact which advance the abject bulk additional a allowance for a few years admitting afresh there are added articles advancing on the bazaar area they will clue the abject bulk for the activity of the loan.



Accouterment it is a low abundant allowance over the abject bulk and the abject bulk charcoal at a adequate level, this can be decidedly amount able to a buy to let freeholder as it can abstain the call for approved refinancing and the costs complex in the exercise.

Why Not Learn added about buy to let and acquisition out how you can alpha your buy to let acreage portfolio.

Jennifer Tweed is the architect of buytolet4sale.com, one of the UK's aboriginal acreage portals committed to all types of investment acreage for auction and aggregate you should allegation for your auction and purchase.



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