Tracker Mortgage Details
Well, a tracker mortgage is firstly a type of variable rate mortgage, as it follows a specific interest rate - one set by the Bank of England, and it tracks it by a given percentage above that rate.
For instance, it could be that the base rate always has a fixed percentage added, or it could be that the amount above base rate varies slightly from time to time depending on the tracker mortgage product that you have.
In general this implies (but is not an absolute rule due to other charges and considerations to take into account) that the closer the tracker is to the base rate, then the better that mortgage product is in terms of having less to pay for your mortgage overall.
The fact that this is variable rate gives the major pro and con of this mortgage: if the interest rate falls, then your payments go down. However if the rate rises, then of course it tracks the other way which means that you pay more on your mortgage which is not so good for you. This means that budgeting could be harder than if you are on a fixed rate as you never know from one month to the next what your payments are going to be, though interest rates swings are hardly ever more than 0.5% at a time and are ordinarily 0.25%, but a few small rate rises over a period of six months could considerably add to the cost of your mortgage.
One good point of a tracker is that there is not the same necessity to remortgage as there is no set period where you have a better rate like for instance is often the case with a discounted variable rate mortgage - if you are tracking at base rate +1% then you can just sit on that mortgage deal, as it were, for the duration of the loan period. All of the above taken into account, they can be a quite a good option for many people and at the same time cost effective when looked at as the total sum that will ultimately be repaid at the end of the mortgage period.
More property related articles:
- Best Buy Mortgage Tables
- Purchasing a Penthouse
- What is a property auction
- Life Insurance
- Interest Only Mortgage
