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Mortgages
Different Types Of Rates
Variable rate is the standard interest rate charged by a lender that may be varied from time to time at the lender’s discretion.
Discounted rate is the rate charged after a specified discount has been applied to the lender’s standard variable rate. The discounted rate will apply for a certain period and will increase or decrease in line with as the lender’s standard variable rate.
Fixed interest rate is a rate guaranteed to remain unchanged for a specified period. Once this period is up, the interest rate applicable to your mortgage will usually change to the lenders standard variable rate at the time or, subject to an agreement with the lender, to a new fixed rate.
Deferred interest rate - For an initial period, the amount of interest payable will be less than the standard rate. The difference between the amount that would have been paid and the amount actually paid is added to the original amount of the loan. At the end of the deferral period the monthly repayments will increase so as to repay the interest due on the original loan, plus the unpaid interest which has accrued during the deferral period.
Capped interest rate - The interest rate payable on a mortgage is guaranteed by the lender not to rise above a stated level for a specified period. At the end of this period the interest rate will revert to the lender’s standard variable rate. If this is higher than the capped rate then monthly payments will increase.
Capped and collared - The rate of interest payable on a mortgage will not rise above or fall below specified upper and lower limits for a specified period. This will save money if the lender’s standard rate rises above the ‘cap’ rate, but it will prevent any saving if rates fall below the ‘collar’ rate. At the end of the specified period the interest rate payable on your loan will revert to the lenders standard variable rate
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