A standard variable rate mortgage (which is SVR for short) is the standard borrowing rate offered by loan companies. It has a tendency to mimic the Bank of England Base Rate, moving higher and lower a long with it. Loan providers will most often charge 1% or 2% beyond the Base Rate as their SVR. This suggests that should the Base rate goes higher, so also will your mortgage rates, hence the term 'variable' due to the fact that your instalments can vary.
A fixed mortgage means that the rate of interest on a mortgage won't vary for an established time frame. It provides the customer a degree of comfort knowing that their mortgage instalments will not go up before the end of that time frame freeing them plan their finances appropriately. After a fixed rate mortgage period of time had run it's course the mortgage rate will go back to a standard variable type.
A tie in period on a mortgage means you are bound to the mortgage provider for a specified term. Therefore, the mortgage provider will give you a good deal, for example, a fixed rate mortgage for the initial two years. Though you could be tied to the mortgage provider for a specified time period. subsequently, such as a year, where you must cover their SVR (standard variable rate).
This is a strategy for mortgage companies to recover the amount of money they sacrificed in extending to you a good deal for the initial two years. If you want to change mortgage lenders while in the 'tie in' term, it will be necessary for you to pay a financial penalty which might add up to thousands of pounds.
Many existing borrowers tend to put off remortgaging because they think the trouble generated by the procedure is just not worth while. Your existing lender should be approached and asked just what alternative offers are available. If you have doubts about the procedures and benefits about remortgaging, then it may be prudent to call on the expertise of an independent mortgage advisor - preferably one who is not tied to any one particular mortgage lender. The internet can also be a good place to start but make sure you read and understand all the small print and take professional advice before committing yourself to any deal.
If the mortgage you have at present has, for instance, a three year introductory discount and you are still within that three year period, you may have to pay an early redemption charge and it would be wise to check to see if after paying redemption charges, the new deal you are seeking is still worthwhile.
Amongst borrowers in the U.K. there is still a great deal of apathy from those who think it is just too much hassle to change their lender or type of mortgage. If the balance of your present mortgage is sufficiently low and you are receiving a loyalty rate from your lender,it could be that the monthly savings you generate means that it would be better not to change but keep to the deal you have at present.
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