Are Tracker Mortgages the Best Type?

There are any types of mortgages and if you talk to different mortgage holders it is likely that they will all give you different information about which type of mortgage they feel is the best. They will probably prefer the type that they have got, unless they have had a really bad experience with it. It can therefore be difficult to know which is really the best unless you speak to a financial advisor. However, you can find out more for yourself by doing research. If you find out more about the types of mortgage and how they work, then you will be able to more easily work out how they might benefit you.

What is a tracker mortgage?

A tracker mortgage is one that will track the base rate. The base rate is shorthand for the Bank of England Base Rate and this is the interest rate that the Bank of England lends money out to banks. If this rate changes then banks may choose to change the rates on the money that they are lending. This might apply to new borrowers as well as existing ones, depending on what type of borrowing they have. With a tracker mortgage, the interest rate that you are charged tracks the base rate. You will be charged a fixed amount in addition to the base rate. The fixed amount will cover the costs of the lender and the base rate will cover their interest rate. If the base rate goes up then the tracker rate will go up by the same amount and vice versa if it goes down.

When is it advantageous?

If interest rates fall then a tracker mortgage rate will also fall. This means that the borrower will immediately be able to take advantage of the reduced rates. Often with other variable rates it will take longer for the lender to lower rates or they may decide not to lower them at all. So, when rates are going down or staying low for a long time, the tracker rate is really good. It will mean that you will only be paying a low rate of interest on your mortgage. This will make the mortgage repayments cheaper. This could free up money for paying other things or could mean that you can afford to overpay your mortgage a bit so you will repay it early and save money on interest in the future, perhaps when the rates are significantly higher.

When is it not good?

If the base rate goes up then the tracker mortgage rates will go up too. This will happen very quickly and will mean that you will quickly be paying the higher rates. This is not so good as obviously no borrower wants to be paying more. If the rates go up a lot, then it could mean that you will be paying more and more in quick succession which could mean that things will get expensive very quickly. Some people do not like the uncertainty of this as they are worried that they will not be able to afford the repayments if the rates go up too much. If repayments cannot be paid then there will be extra fees or charges and this is not good. If the problem gets too bad the borrower may go to court or even have their home repossessed.

Is it worth having?

It can be quite a tricky decision to know whether it is good to have a tracker mortgage or not because it is impossible to predict what the interest rates might do. If you think that the interest rates are likely to go down, then having a tracker mortgage could be great. Often when rates fall, lenders are slow to lower the rates of loans, but with a tracker they will have to lower them. However, if rates go up, they will tend to raise rates for all loans pretty quickly, this means that in this situation there will not be much difference between a tracker and a variable rate loan. This means that a tracker is probably always better than a variable rate loan. However, there could be some advantage in having a fixed rate loan, especially if you think rates will go up. It will mean that you r interest rate is fixed for a certain period of time and therefore you will protected against rises in rates. This is especially good if you feel that it will be a struggle to make higher repayments. However, the interest rate for fixed rate mortgages tends to be higher than that of variable rates so you may still end up paying more. It is very hard to know until after the fixed term has ended. It is worth remembering though that lenders want to make as much profit as they can and so they will set the fixed rates at a level where they will expect to profit as well as they expect to from a variable rate.

Where is the Best Place to go for Business Loans?

If you need a business loan, then it will be a good idea to look at a variety of places for it. The reason for this is that you will be able to compare the different lenders in order to make sure that you are getting the best loan. It is wise to make sure that you compare the loan sin several ways though.

Cost

Many borrowers will just look at the cost of the loan. They will see which loan will be the cheapest for them and then pick that loan. Logically that would seem to make sense, but there are a few other things that you need to consider as well. Firstly, many people will just compare the interest rates when they are looking at cost. However, this is not always sensible because it is not just the interest rates that will determine the cost of the loan. You will find that you may also be charged some fixed fees such as admin charges for starting the loan. Therefore, actually calculating hat the loan will cost you in monetary terms, could be a much better way to compare them.

You will also be charged if you miss a repayment. This amount could vary quite considerably. You may not think that it will be important as you may assume that you will always make those repayments. However, it is hard to predict the future and you may find that you will miss a few and then you will have to pay these charges. Although the charges should not be the main part of your decision when comparing costs, they should not be totally ignored. If costs are the same between lenders then it could be these costs that make the difference in which ones you choose.

Repayments

The repayments can be almost more important than the cost of the loan. This is because if you miss a repayment it will be expensive and you will be more likely to miss a repayment if they are higher. However, if you have smaller repayments, there will be more of them and this will make the loan dearer. This is because you get charged interest while you owe the money and therefore the longer you owe it for; the more interest you will pay. You therefore need to get a good balance between cost and ease of repayment. If the repayments are too big and you miss one, then this could end up costing you more money, because of the charges, than having lower repayments but more of them.

Lender

Some people might also have requirements with regards to the lender. We tend to be loyal and want to use lenders we have used before, ones that are recommended to us or at least ones that we have heard of. Although they may not necessarily be the best, this could be important for us. We may also find that we will have criteria that are important to us such as wanting a lender with a nearby branch or a good customer service or things like that. We might even decide that going with the bank that we have our business account with would be a good idea as they might be more likely to lend to us. It is good to think about these things, but also worth thinking about how important they are compared to the cost and ease of repayment. If you find a cheap lender which is easy to repay, would you really worry if you had not heard of them? It may just be that they are new on the market or that they are not well-known because they do not advertise and pass those savings onto their customers in the form of cheaper loans such as those offered at Omacl.co.uk.

So, people have all sorts of reasons for choosing particular lenders. It would make sense to get your business loan form a lender which will offer repayment terms that you think will suit you well and that are not overly expensive. It will take time to do this research though and to find the most suitable lender. It will be worth it though as it could save you a considerable amount of money as well as possibly making it easier for you to repay your loan. Therefore, take the time because you will not regret it or, if you really do not have the time it could be worth paying an independent financial advisor to help you. They will be able to do al of the research for you. They may even look at your accounts to determine how much you will be able to afford to repay. You will have to pay them, but it could be well worth it if it means that you will be able to get a loan that will cost you less money and be easier to repay. It is likely that the financial advisor will save you more money than they will cost you.