Tracker mortgage is a kind of variable rate mortgage that tracks the base rate. In tracker mortgage the mortgage repayments have the ability to change very month.
Find out more about Tracker mortgage, its pros and cons and more.
Who is eligible for a tracker mortgage?
Being a first time buyer tracker mortgage is a good option as it provides low rates however it is wise to find a deal with a cap if you are unsure about rate increases. Typically buy-to-let mortgages are expensive, choosing a tracker deal provides the advantage of low interest to keep the payments down. This UK based interest are recorded as the lowest for quite some time owever when they rise, taking a tracker mortgage can be an attractive option. The rate cuts are motre likely to happen s that you can take advanatge of the low rates.
Difference between a tracker mortgage and a fixed rate mortgage
In a fixed rate mortgage the payments do not chage in short term. These offer good value rate if taken for limited time periods. therefore if you are on a budget and would like to know how much you are exoected to pay every month then this is an ideal option. Your payments will not go up throughout the mortgage lifespan even if the rates go higher. However you will not get reduced mortgage payment in case the rates drop.
Tracker mortgages and interest rates
As a rule for tracker mortgage rates do not align with interest rates however they are fixed at a level above the set rate. It is always good to search for the introductory deals for instance the Bank of England Base Rate is 1.00%. If this rate is set at 0.75% then you would be required to pay 1.75%.
How do tracker mortgages work?
The tracker mortgage follows the base rate of Bank of England. In case the interest falls you will be making lower payments to the lended and in case it rises the payments will increase. Getting a tracker mortgage in the introductory offer is a good deal. Remeber the amount can go up or down. One thing to keep in mind is that you cannnot predict the mortgage payments in advance.
How long can I get a tracker mortgage for?
You can get a tracker mortgage in the intial period for about 1-5 years or you can opt for lifetime tracker that lasts for as long as your mortgage will last. When getting a tracker mortgage for limited time and when it ends you will be moved to the standard variable rate of lender or else you will end up paying each month.
Meanwhile you can look around for options to remortgage your property with a fixed rate or tracker mortgage, whatever suits you best. If you go with fixed-rate deal then look for a new mortgage provider as the lender who initially arranged for tracker mortgage might offer some fixed rate products that suits you.
Advantages of tracker mortgage:
- When Bank of England drop the interest rates so will the repayments without any collar rates.
- In case the interest rates boost up and you would want to switch with fixed rate mortgage then provider may let you do so.
- You can switch the mortgage type without any fees charging.
- You can get good introductory rates and the repayments will also be minimal.
- Early repayments charges are affordable in comparison to any other type of mortgage.
Disadvantages of tracker mortgage:
- If the base rate of Bank of England goes up so will the repayment rates.
- Collar rates mean that when the base rate falls to the lowest record, the mortgage rapyment will not follow the suit and you will have to pay the minimum amount capped.
- When you remortgage during the introductory period or wish to make full mortgage payments then you may be charged.
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