2 year tracker/variable confusion

boston

I am considering buying a house and am a bit baffled by which is the best mortgage for my needs. Comparing fees and % rates is very confusing!!

I would like a 2 year variable/tracker that allows me to overpay by 10% (or more if not too much extra).

I have a 40% deposit by way.

Mortgagehelper

boston wrote: »

I am considering buying a house and am a bit baffled by which is the best mortgage for my needs. Comparing fees and % rates is very confusing!!

I would like a 2 year variable/tracker that allows me to overpay by 10% (or more if not too much extra).

I have a 40% deposit by way.

Ok, let's talk basics first of all.

You will have the choices of a variable rate (commonly known as Standard Variable Rate) or Tracker based deals. The trackers 'track' the Bank of England base rate for a period of time.

Basically, if you take out a deal which is discounted from a lender's SVR, then only the lender decides when to adjust your interest rate following a BofE Base Rate change.

This is the scenario which we have seen over the last 12 months, where lenders drag their heels when rates plummet.

With Tracker deals you are guaranteed to see the same changes to your payments once the Bank of England changes the bank base rate.

So, if you had been on one for the last 12 mths, you should be as happy as a pig in the proverbial.

Most mortgages where you are 'tied in' will give you the 10% allowance, however you also have the option of more flexible mortgages - for example, Woolwich Open Plan (other flexible mortgages are available ).

These allow you to place overpayments into an offset arrangement (normally a savings account) where you give up interest earned on the savings to reduce the interest paid on the mortgage.

So, if you had a mortgage of £100k with Savings of £20k - your monthly repayments would be based on your £100k balance, but you would only be charged interest on your net figure of £80k - therefore you would be overpaying each month.

Just an example, there are many deals out there to consider, obviously what could be available to you would be down to your individual circumstances.

By having 40% deposit you are exactly the type of client the banks want at the moment.

Hope this helps.

pwllbwdr

The HSBC trackers allow unlimited overpayment without penalty. With 40% deposit you should get a good rate - check first direct too.