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different deals Fixed rate - the rate of interest you pay is the same throughout the period of the fix - for example, 6.50 per cent for three years - so you know exactly how much your mortgage will cost and for how long. The risk is that the lender's standard variable rate (the rate you would pay if you didn't have a special offer rate) may fall below your fixed rate, so you're paying more than other borrowers. Even so, the advantage is that you can budget confidently. Capped
rates - like fixed rates, capped interest rates have
an upper limit but below that the rate you pay fluctuates in line
with the lender's standard variable rate. So you get the best of
both worlds - a maximum rate but the ability to take advantage of
falling interest rates. The catch is that most capped rates are
set too low for rates to fall below and because they're not as generous
as fixed rates you could end up paying more. If you're risk-averse,
however, this may be the product for you. Discounted rates - the lender's standard variable rate is reduced by a set percentage. For example a 2 per cent discount on a variable rate of 7.50 per cent means you pay 5.50 per cent for the offer period. If that standard variable rate changes, so does the rate you pay, although you'll always be paying 2 per cent less than the variable rate during the discounted period. Base-rate trackers - the rate you pay is at a set margin above the Bank of England's base rate and changes as the Base Rate changes. You don't have to rely on your lender dropping its mortgage rate in line with the Bank of England's Base Rate, but the rate you pay will automatically rise if the base rate rises, even if your lender decides not to increase its mortgage rate. Cashbacks - you receive a cash lump sum on completion of your mortgage, which is either a percentage of your loan or a set amount. After that you are generally tied in to that mortgage deal for the next few years at the lender's standard variable rate. If you're a first-time buyer and would benefit from a lump of cash when you move in, perhaps to buy furniture, then a cashback might be useful to you. Some special offer rate deals, like fixed and capped rates, also come with a small amount of cashback. 100 per cent loans - if you're unable to come up with a deposit then you could get a 100 per cent loan. While you'll pay more each month in interest because you've borrowed more, you're able to buy a home when you need to. If you know you can afford the monthly repayments - perhaps because you pay rent each month - but don't have any spare cash to save up, this could be a good deal for you. You will have to pay a fee for not offering a deposit, however, and you still have to cover the usual costs of buying a home. Click here to go to the Complete guide to Homebuying calculator and mortgage finder which will help you find the special offer rate you want.
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