Insights, Mortgages & Renting

What is a Tracker Mortgage?

flik eco finance personal what are tracker mortgages

If you're a first-time homebuyer, tracker mortgages may be something that you're unfamiliar with. In this blog post, we will provide a complete guide to tracker mortgages for beginners. We'll discuss what they are, how they work, and why they might be a good choice for you. At the end of this post, you should have a clear understanding of what tracker mortgages are and whether or not they are the right choice for you!

What is a Tracker Mortgage?

A tracker mortgage is a type of variable rate mortgage. With a tracker mortgage, your interest rate will track, or follow, an agreed index, usually the Bank of England base rate.

If the Bank of England base rate changes, your tracker mortgage interest rate will usually change by the same amount at the same time.

For example, if the Bank of England base rate rises from 0.50% to 0.75%, your tracker mortgage interest rate would rise from say, tracker plus two percent (0.75 + 2%).

The main benefit of tracker mortgages is that they offer borrowers greater certainty over their monthly repayments than other types of variable-rate mortgage.

What Are the Different Types of Tracker Mortgages?

There are two main types of tracker mortgages: those linked to the Bank of England base rate, and those linked to the lender’s standard variable rate (SVR).

Tracker rates that follow the Bank of England base rate are usually lower than SVRs, but they can go up or down in line with the 0.25% changes announced by the Bank of England.

Lenders’ SVR tracker rates don’t usually change as often, but some may rise and fall in line with the Bank of England base rate while others might not budge at all. It’s worth noting that tracker mortgage deals tend to have shorter terms than fixed-rate deals – typically two to five years.

So, there you have it – a tracker mortgage is simply a type of variable rate mortgage that’s linked to an external reference rate. And while they might not be the right choice for everyone, tracker mortgages could help you save money on your monthly repayments if interest rates stay low. Just remember to keep an eye on those rates in case they start to rise.

What Are Some Alternatives to a Tracker Mortgage?

If you're not interested in a tracker mortgage, there are plenty of other options out there.

You could get a fixed-rate mortgage, which would protect you from changes in interest rates.

Alternatively, you could get an adjustable-rate mortgage, which would give you lower monthly payments at first but could increase over time.

What Are the Benefits of a Tracker Mortgage?

There are several benefits to tracker mortgages that make them an attractive option for many borrowers. One of the biggest advantages is that tracker rates are often lower than fixed rates, which can save you money over the life of your loan.

Another benefit is that tracker mortgages offer more flexibility than fixed-rate loans. For example, if you have a tracker mortgage, you may be able to switch to a different type of mortgage without incurring any penalties. This can be helpful if your financial situation changes and you need to adjust your repayment schedule.

Lastly, tracker mortgages can provide peace of mind in knowing that your monthly payments will not increase unexpectedly if interest rates rise. This predictability can help you budget better and make more informed decisions about your finances.

If you're thinking about taking out a tracker mortgage, be sure to compare offers from multiple lenders to find the best deal for you.

What Are the Risks of a Tracker Mortgage?

Tracker mortgages come with a few risks that borrowers should be aware of. The most obvious risk is that if interest rates rise, your monthly payments will go up as well. This could make it difficult to keep up with your mortgage payments and put you at risk of foreclosure.

Another risk to consider is that tracker mortgages are often adjustable-rate mortgages (ARMs). This means that the interest rate on your mortgage can change over time, which could increase your monthly payments. If you're not prepared for this possibility, it could cause financial hardship.

Finally, tracker mortgages typically have higher interest rates than fixed-rate mortgages. This means that you'll end up paying more interest over the life of the loan. If you're not comfortable with this risk, you may want to consider a different type of mortgage.

What Do I Need to Get a Tracker Mortgage?

The first step is to speak to a tracker mortgage advisor. They will be able to tell you if tracker mortgages are the right option for you and your circumstances.

You will need:

  • A good credit score
  • A deposit of at least 20%
  • To have been employed for at least one year in the same job, or three years if self-employed
  • To be a UK resident, and usually a first time buyer

If you meet these requirements, then you may be eligible for a tracker mortgage.

Tracker mortgages can offer some great benefits such as low interest rates, however it's important to remember that they are also linked to the Bank of England base rate.

Can I Get a Tracker Mortgage With Bad Credit?

The tracker Mortgage has been popular in Ireland as well as the UK as it offers borrowers protection against future interest rate rises. If you are looking for a tracker mortgage and have bad credit, there are options available to you.

You can either go to a specialist bad credit lender or try to find a mainstream lender who will offer you a tracker mortgage despite your bad credit history.

Can I Get a Tracker Mortgage With No Money Down?

The short answer is yes, you can get a tracker mortgage with no money down. There are a few ways to do this, but the most common is through what's called a piggyback loan.

This is where you take out two loans at once - one for the purchase price of the home, and one for the down payment.

The first loan is usually an adjustable-rate mortgage (ARM), and the second loan is a fixed-rate mortgage. By combining these two types of loans, you can get a tracker mortgage with no money down.

Another way to get a tracker mortgage with no money down is by using a government-backed program like FHA or VA financing. These programs allow you to put as little as 0% down on a home, but there are some trade-offs. For one, you'll have to pay for private mortgage insurance (PMI) if you put less than 20% down. Additionally, these programs typically have stricter credit requirements than conventional loans.

What Different Fees Come With a Tracker Mortgage?

There are a few fees that come with tracker mortgages.

The first is the mortgage rate, which is usually lower than the standard variable rate. This could save you money if interest rates rise in the future.

The second fee is the arrangement fee, which covers the cost of setting up your mortgage. This can be paid upfront or added to your mortgage balance.

Finally, there may be an early repayment charge if you want to repay your mortgage before the end of the agreed term.

Where Can I Get a Tracker Mortgage From?

The best place to start your search for a tracker mortgage is with your current bank or credit union. If they don’t offer tracker mortgages, ask about other options, such as an adjustable-rate mortgage.

You can also shop around at other banks and credit unions. Be sure to compare interest rates, fees, and terms before you decide on a lender.

If you have good credit, you may be able to get a tracker mortgage from an online lender. However, be sure to do your research before you apply for any loan, as there are many scams out there.

Can I Apply For a Tracker Mortgage Online?

The short answer is yes, you can apply for tracker mortgages online.

However, the process is a bit more complicated than simply filling out an application.

For one thing, tracker mortgages are not available through all lenders. In fact, tracker mortgage rates are typically only offered by a handful of banks and credit unions.

How Quickly Can I Get a Tracker Mortgage?

The great thing about tracker mortgages is that they can be obtained relatively quickly.

In most cases, you can get a tracker mortgage within two weeks of applying.

This is much quicker than other types of mortgages, which can often take several months to process.

Of course, the speed at which you can get a tracker mortgage will depend on your individual circumstances and the lender you use.

However, in general, tracker mortgages are much quicker to obtain than other types of mortgages.

What Are The Average Interest Rates for a Tracker Mortgage?

The average tracker mortgage interest rate is typically lower than the interest rates for other types of mortgages. That's because tracker mortgages are usually linked to the Bank of England base rate, which is currently 0.75%.

If you're thinking of taking out a tracker mortgage, it's important to remember that your monthly repayments could go up or down depending on changes to the Bank of England base rate. So, if you're on a tight budget, a tracker mortgage might not be the best option for you.

Tracker mortgages can be a great option for people who are comfortable with fluctuating monthly repayments and who want to take advantage of low interest rates.

What Happens If I Cannot Repay My Tracker Mortgage?

If you cannot repay your tracker mortgage, the lender will take possession of your home and sell it to cover the outstanding amount owed. tracker mortgages are typically only available on owner-occupied properties, so if you default on the loan, you could be left homeless.


About Jermaine Hagan (The Plantsman)

Jermaine Hagan, also known as The Plantsman is the Founder of Flik Eco. Jermaine is the perfect hybrid of personal finance expert and nemophilist. On a mission to make personal finance simple and accessible, Jermaine uses his inside knowledge to help the average Joe, Kwame or Sarah to improve their lives. Before founding Flik Eco, Jermaine managed teams across several large financial companies, including Equifax, Admiral Plc, New Wave Capital & HSBC. He has been featured in several large publications including BBC, The Guardian & The Times.

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