If you’re unsure about whether to go for a tracker mortgage deal or a fixed-rate mortgage, it could be sensible to look into the possibility of choosing a capped tracker or droplock mortgage.

While tracker mortgages can seem very cheap, there is always the concern that rising interest rates in the future could blow your budget by hundreds of pounds. Meanwhile, the arguably safer, fixed rate option is likely to have the downside of being more expensive, at least in the short term.

While mortgage protection can help reduce the risks of taking on a mortgage, you also need to make sure you will be able to make the monthly payments while you remain employed and healthy, and taking on the right kind of mortgage for your circumstances will make this a lot easier.

Fixed rate and tracker mortgages are not the only options – there are compromises which may be able to offer you positive aspects from both sides.

Capped tracker mortgages

A capped tracker deal is one which tracks the base rate up to a certain level, where it will stay. If you can find a capped tracker where the cap still represents manageable monthly payments, this could be an excellent option – giving the benefits No prescription cialis of a cheaper tracker deal without the risks.

Droplock mortgages

These are tracker mortgages with a droplock option. The droplock means that you can switch to a fixed-rate deal whenever you want to, without having to pay the penalties usually associated with ending a mortgage Cialis Professional deal before the agreed term finishes. This means that when the base rate rises and your monthly payments increase beyond a level which is manageable, you have the opportunity to research the market once again and find out what is the best option in the changed circumstances.

What are the drawbacks?

Capped trackers:

While these mortgage deals can offer a healthy compromise to those making the choice between fixed-rate and tracker, there are a number of possible drawbacks. For example, providers may well demand a substantial arrangement fee for setting them up.

Also, the cap on capped trackers may be fairly high, say, 5%, meaning that a cheaper fixed rate mortgage could still save money in the long run compared to the capped tracker. However, if interest rates do stay low then this may not be a concern, and at least there is the certainty that the cap will prevent payments from really skyrocketing over the next few years.

Droplock mortgages:

The option to switch mortgages at any point may seem very attractive, but the likelihood is that once interest rates have risen, the cheaper fixed rate mortgages will no longer be available. Therefore you may find that switching mortgage deals and locking yourself into a higher, fixed-rate deal is no longer such an attractive option. Even if you do find a cheap fixed-rate deal later on, you could find yourself hit with a reservation fee of up to 995 pounds.

Which mortgage deal should I choose?

There are a number of benefits to capped tracker and droplock mortgages, and the right decision for you will depend on a number of factors, including the size of your mortgage and your potential financial vulnerability should interest rates rise. Speaking to a specialist mortgage broker or independent financial advisor can help you to weigh up all these factors. Whichever mortgage you choose, it is sensible to consider taking on mortgage protection to help safeguard your home in the future.

Author Bio: At Credit Choices you can compare mortgage protection offers online. Whatever your individual mortgage needs, we can help you find the best deal.

Category: Finance/Mortgage
Keywords: mortgage protection, droplock mortgages,capped tracker mortgages,mortgage,mortgages