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Variable Rate Mortgages

Variable Rate mortgages are what you would probably consider a traditional type of mortgage.

The interest rate, or APR, will vary as the Bank of England raises or lowers interest rates. This means that your payment will also change as interest rates change.

This is something that you really need to be aware of and take into account when taking out this kind of mortgage. This is especially the case if you are really pushing your budget to buy your home and borrowing as much as you can afford. If interest rates were to increase, you monthly mortgage payment would also rise and you could find yourself struggling to pay your bills each month.

A mortgage is a loan that is secured against your home - if you can't keep up repayments you may be at risk of losing your home.

Advantages of Variable Rate Mortgages

One advantage of variable rate mortgages is that they are often more flexible and come with lower fees than other kinds. You will find that many mortgages, such as those with fixed rates, have periods are the start of the mortgage where there are prepayment penalties. This means that if you move house within that period, or want to make extra payments on your mortgage, you may find you have to pay penalty fees. This is much less common with Variable rate mortgages, but make sure you check the details on your individual loan.

You may also find that variable rate mortgages have fewer fees when you are initially taking out the loan. This can be a big saving, especially if you are struggling to find money for a down payment and moving expenses.

If you want more security in your monthly payments each month, take a look at fixed rate mortgages or capped rate mortgages.