Variable Rate Mortgages

A Variable Rate Mortgage is a mortgage product that is offered to the market at lower interest rates in comparison to a fixed rate mortgage. With interest rates being at their lowest for many years, Variable Rate Mortgages have become increasingly attractive as the interest rates have lowered in recent years due to the Bank of England base rate and the rate of competition that has grown in this financial sector

A variable rate mortgage is a loan issued by a lender which is secured against a form of your property. The standard variable rate part (SVR) is calculated using the Bank of England base rate. The Bank of England base rate is currently at one of the lowest it’s ever been; therefore variable rates that are set by lenders are also at their lowest.

SVR’s on these mortgages are typically lower and are very attractive; however the mortgage rate can be changed at any time. If at any time the Bank of England decided to increase their base rate, the SVR would also rise. Therefore, you will be paying less for your mortgage, however, if the rates were to increase, your monthly mortgage repayments would also increase due to the fluctuation of interest rates. Alternatively, if there was a reduction in the Bank of England base rate, this would be of an advantage to you as the variable mortgage rate would decrease which in turn would reduce your monthly mortgage repayments.

When you have the found the property that you want to mortgage against, it is often best to research lenders thoroughly for the best Variable Rate Mortgage product available. With the introduction of the internet, lenders are not only competing against each other for business in the high street but they are also facing competition from specialist loan companies that have been set up through the internet.

If you are confused by the amount of information available to you, it can be advisable to check with a financial advisor before you commit yourself to a lender. You can usually arrange this through your existing lender. It can be wise to make an appointment to discuss all the relevant details as there is a lot of information to digest with regards to any type of mortgage. If you are sure of exactly what you are looking for, you can head straight for the internet, where online applications are very welcome, which not only saves you and the lender time but you will usually be given an immediate response with regards to acceptance.

When applying for a variable rate mortgage, you may be eligible to borrow 90 to 95% of the value of your home depending on lender and which product you have chosen. Your application will be based on your income of which if you are a sole applicant, you can potentially borrow 3.5 times your salary or more depending on lender. If you are applying in joint names, the lender could potentially loan you either 3 times your joint income or more depending on lender.

All financial institutions run credit checks on people applying for mortgages. This gives the lender the ability to assess your risk involved when approving the mortgage. They will look at personal details such as monthly outgoings, employment history and any outstanding debt you may have. The lender will also have to assess the value of your home to ensure that it is compatible with the amount of loan applied for.

With this type of mortgage, there is often no redemption penalties imposed when repaying early or re-mortgaging. If you move property and want to re-mortgage to another lender or if you have the ability to repay your mortgage earlier than the set term, you will not be charged for doing so.