| When applying for a self cert mortgage in the UK you can choose from various options like capped or variable interest rates. Mortgages with with fixed repayments and those that vary in line with the Bank of England Base Rate (BEBR), which in turn varies according to Government targets on inflation. Of course, this depends on the lender as well. Here is a short guide to the different types of mortgage available:
Variable rate: Lenders usually peg their Standard Variable Rate (SVR) to the BEBR.
TIP: A mortgage lender’s SVR is fairly high, which snaps into place once once your intial (low rate) offer period is over.
If you believe you'll want to change after a couple of years, avoid self-cert mortgage UK lending companies who impose Early Repayment Charges (ERCs), especially ones that go beyond the offer period or carry an overhang. Many self-cert products with low introductory rates will probably carry ERCs to dissuade you from moving at the end of the offer period.
Discount: These offer a discount off the lender’s SVR. Although the starting rate may seem attractive, this is still a variable rate and could go up and down with the SVR, which will in turn vary in line with the BEBR. Therefore, while your rate could drop, it could also increase. Regardless, you will revert to the SVR after the discount period is over.
Fixed rate: These are useful if you need your monthly self-cert mortgage UK payments to stay at a fixed rate for a set (short) period of time, usually two years. They usually then revert to the lender’s SVR.
TIP: Some lenders offer long-term fixed rates. If, however, the BEBR were to drop very low indeed, you would miss out on big savings. There are also ERCs to tie you in.
Capped: A capped self-cert mortgage offers a variable rate with a fixed 'ceiling'. It won't go above a set rate, even though your interest may move up or down with the base rate. This means your payments will be kept down. Do not confuse the initial payment rate with the capped rate.
Tracker: These products are pegged to the BEBR. A tracker will offer a set % above the BEBR and move up and down in in synchronisation.
TIP: This could mean that your rate and your monthly repayments could lessen. However, if you're looking for reliability, this may not be the way to go.
Look out for the Annualised Percentage Rate (APR), which self cert mortgage UK lending companies are obliged to display, which indicates the interest rate plus any other charges.
Many lenders will offer or include buildings and contents insurance and Mortgage Payment Protection Insurance (MPPI). You may be able to get a nicer deal on insurance from someone, such as an independent broker, so don't be idle; shop around for a wee while. If you are looking for self cert mortgage UK there are products that are worth your while. However, you will need to do some research in order to find the lender with the best interest rates and low self cert mortgage UK fees. |
