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There are four types of mortgage available:
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Buy to Let Mortgage: A Buy to Let Mortgage is designed for borrowers who are purchasing a
property as an investment with the intention of letting the property out.
These are not regulated by the FSA.
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Tracker Mortgage: A Tracker is a type of mortgage whereby any changes in the rate of interest
charged follow exactly ('track') another, specified, interest rate or index.
Typically a tracker mortgage will track the base rate set by the Bank of
England.
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Buy to Let Tracker Mortgage: A Buy to Let Tracker Mortgage is a particular type of tracker mortgage
designed for borrowers who are purchasing a property as an investment with
the intention of letting the property out. Like an ordinary tracker any
changes in the rate of interest charged follow exactly ('track') another,
specified, interest rate or index. Typically a tracker mortgage will track
the base rate set by the Bank of England. (These are not regulated by the
FSA.)
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Fixed Rate Mortgage: A Fixed Rate Mortgage under which the rate of interest has been fixed for a
specified period of time. The interest rate remains constant; typically for
2, 3, 4, 5 or 10 years. Longer term fixed rates (over 5 years) whilst
available, tend to be more expensive and therefore less popular than shorter
term fixed rates.
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Flexible Mortgage: A Flexible Mortgage that allows the borrower to make over or under payments,
or even take a payment holiday.
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Buy to Let Fixed Mortgage: A Buy to Let Fixed Mortgage is a particular type of fixed rate mortgage
designed for borrowers who are purchasing a property as an investment with
the intention of letting the property out. These are not regulated by the
FSA.
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Discounted Rate Mortgage: A Discounted Rate Mortgage offers a lower level interest rate (e.g. a 2%
discount) than the standard variable rate usually for a specified period.
The discounted rate typically applies at the start of the term of a
discounted rate mortgage. Periods are typically 1 to 5 years. Sometimes the
discount is expressed as a margin over the base rate (e.g. BoE base rate
plus 0.5% for 2 years) and sometimes the rate is stepped (e.g. 3% in year 1,
2% in year 2, 1% in year three).
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Standard Variable Rate Mortgage: A Standard Variable Rate Mortgage is a mortgage based on the variable
interest rate set by the lender. This standard variable rate (SVR) may be
increased or decreased at the discretion of the lender. The standard
variable rate often applies at the end of any fixed, capped or discounted
period of a mortgage.
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Capped Rate Mortgage: A Capped Rate Mortgage sets a maximum rate of interest that the lender can
charge, but only for a specified period. This then returns to a standard
variable rate of interest at the end of the capped period. Like a fixed rate
mortgage, the interest rate on a capped mortgage cannot rise above the
capped level but can vary beneath the cap. Sometimes there is a collar
associated with this type of rate which imposes a minimum rate. Capped rates
are often offered over periods similar to fixed rates, e.g. 2, 3, 4 or 5
years.
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Cash Back Mortgage: A Cash Back Mortgage is a mortgage whereby an amount of money is paid by the
lender to the borrower at the start of the mortgage, usually to help with
the costs of moving home.
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