The cheapest ways to get the home of your dreams
The world of mortgage loans can be confusing, with all kinds of jargon. Variable rate loans tend to be the cheapest, but fixed rate loans offer more security. Capped loans and tracker loans are somewhere between the two, while offset loans can save you a fortune in interest.
Your house is a massive purchase, and wading through mortgage loans is likely to give you a massive headache. Making sense of the different products can be a nightmare, but it's much easier if you know what you're looking for.
If you want the lowest possible interest rate, then variable rate mortgage loans are for you. However, if rates rise, so will your payments. It may be worth considering fixed rate mortgage loans instead. Fixed rate mortgage loans are slightly more expensive but the payments won't increase if interest rates rise.
Tracker loans follow the Bank of England Base Rate exactly – so if it falls, so do your payments; if it rises, your payments will rise too. Capped mortgages are again like variable rate mortgages, but the lender promises that if interest rates rise, your payments will only rise by a certain amount. Again, capped mortgage loans usually have higher interest rates than variable rate ones.
Offset mortgage loans combine your current account, savings account and mortgage in a single account. If you're careful with your money, an offset mortgage can dramatically reduce the amount of interest you pay – and it could enable you to pay your mortgage off early.
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