How do tracker mortgages work

Rokitron

If i was to take out a lifetime tracker, do the monthly payments come down as the mortgage gets paid off, or do they only change if the interest rates change?

maninthestreet

Montly payments for a repayment mortage stay constant throughout the mortgage term, assuming the interest rate applied to the mortgage doesn't change. This is no different for a tracker mortage.

Reds-on-Sea

If I understand correctly (highly unlikely), the important part is the % above base rate. The only time the payments will change is when the base rate changes or if you over pay. The ratio of interest to payment changes as time goes on, but it's all calculated at the start of the mortgage.

If all the money you paid in went towards the capital, then yes, for every £1 you put in, the loan would decrease by £1 + interest of £1. I've also (nearly) got my lifetime tracker, it'll start in a couple of weeks. I'd like to know whether if I overpaid, say 10K, does the entire 10K amount get taken off the
capital, off the interest or a percentage of both? If it comes off the capital, then surely the situation would be as described above where my loan total would come down £10k + interest on £10k(for the remainder of the mortgage) in which case, yeah, why don't the payments decrease throughout the life of the mortgage? And if I borrowed £200k, and repaid £200k on day 1 of the mortgage, I wouldn't have to pay any interest?

Maybe that only applies to overpayments above your regular monthly payment?

can someone explain please?

natman

I have a Base rate tracker and the most important aspect is what the % above base rate the tracker is - I opened a Britannia Base Rate tracker some time ago with 0.6% above base rate, and to be honest it has always been a product I would reccomend - One problem with tracker products these days is you dont get such a great % rate above the base rate, as you did in the past, but then again, most mortgages are like this..............
Another aspect of my Tracker is, i can make overpayments as and when i like, i am not tied in. One briliant thing over the past 6 months or so is that when lenders have been increasing their product rate, or not passing on the BOE rate cuts, my product has reduced every time.................

natman

Also to answer some queries - if i over pay i need to highight that i am making a capital payment. so for example - if i paid £1000 off i need to inform them that this is capital, i always keep my payments the same as i would be decreasing the term of the mortgage in the long term ( i.e not paying interest on the £1000 i have just paid off)
I am presuming if you overpay, you could re-calculate a new monthly payment - which would be less taking into account the money paid off the capital - but in my opinion a bit pointless paying off capital to reduce payments by a few quid.
Also yes- your monthly payments stay the same during the life of the mortgage - unless -
BOE - Change interest rates up or down
You make overpayments and discuss changing payments
You request changes to your payments - i.e lenghten or shorten your mortgage.