Cashback Mortgages
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Variable Mortgage With this facility you pay at whatever the standard variable rate of your lender is at the time. If the standard rate increases, then your monthly interest payments will increase, likewise, if they decrease, so will your payments. There is normally no penalty attached to early redemption of this facility.
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Lenders may from time to time offer a discount off their normal lending rate. The discount can sometimes be quite large and can last for anything up to say 3 to 4 years. At the end of the discount the mortgage returns to the lenders variable rate. As only the discount is guaranteed, if the standard rate increases, so would your payments.
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With a Capped Rate, a level is set above which your rate cannot rise. You will pay the standard variable rate of your particular lender, however if your lenders rate increases, yours will not increase above the level at which you have capped. Conversely, if their standard variable rate decreases, your payments will decrease. This facility can give you the best of both worlds however decent rates are few and far between.
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The mortgage rate is fixed at a certain rate for a certain period. Payments can neither increase or decrease. At the end of the fixed rate period, you will revert to the lenders variable rate.
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The cashback mortgage is very popular with 1st time buyers and allows you to budget for the expenses of moving in much more comfortably. Cashbacks of upto 8% are often available and as long as you are aware of the down sides to these products all is fine.
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A fairly new addition the mortgage rate stable the tracker has been designed due to the less than honest actions by certain lenders to keep control of their clients money (in their favour). In stating this I mean that when rates go down the lenders have in the past decided to keep some of the benefit for themselves, on reflection when rates have gone up they have decided to add to clients worries by increasing by more than the Bank Of England increase. Trackers are an honest little devil they promise to track the bank base rate and should it rise they will only increase by the same amount, the same with rate decreases you will get the full benefit of the lesser market.
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