A Fixed rate Mortgage with no tie in during the fixed rate period, means you are free to overpay or repay in full your Mortgage at any time without penalty. The majority of lenders will charge you an early repayment charge if you redeem or overpay( 10 % over payment is usually fine) your Mortgage during the fixed rate period. However we have access to lenders that will allow you to fix your payments without any penalties if you over pay or redeem Mortgage in full……
Fixed Rate Mortgage With No Tie In.
Normally when you fix your Mortgage rate for a set period of time e.g. 2, 3, 5 years or longer, the lender will penalise you if you pay off the Mortgage during the fixed rate period.
Most lenders will allow some form of over payment during a fixed rate, but it is usually restricted to 10% of the outstanding balance in most cases
If you are looking for the security of a fixed rate, while having the flexibility to repay your Mortgage at any time or overpay any amount, then there are options available.
Repaying Mortgage In Full with no Penalty.
If you want flexibility and the option to pay whatever you want to your Mortgage, there are normally two options available. The first being the traditional variable rate Mortgage, which will normally allow full repayment or unlimited over payments without penalty. The problem with variable rate Mortgages is the interest rates are usually much higher than fixed rates on the market.Lenders can also change the variable rate, so this can lead to more uncertainty?
This means you are in effect paying for the privilege of being able to pay off your Mortgage when you are on a higher variable rate.
If you could fix your Mortgage payments for a set period at a lower rate than the variable rate, then this gives you the best of both worlds. You will have the security of a fixed rate( if this is a concern for you) and the benefit of a lower rate than a variable rate, This along with unlimited over payments or full repayment without early repayment charges.
What are Your Priorities?
When taking out a Mortgage, you need to think about your short and long term goals. If you have no intention of moving for a set amount of years, then fixing for that period may well be your best option. However life is never straight forward and plans change.
What I am saying, is there are ways to keep your options open. Speaking to a professional Mortgage Adviser is one way to look at your priorities and get proper advice on your options.
What About Tracker Rates?
A Tracker rate is not fixed, most tracker rates will “track” the Bank of England base rate. For example the Bank of England base rate (at time of writing this post ) is 0.1%. So if a lender is offering a 2 year tracker at 1.5 % above the Bank of England base rate, the Mortgage Rate would be 1.6% for 2 years.
Now, you can also get tracker rates with no tie or early repayment charges as well. The crucial difference is tracker rates can still go up or down depending on the Bank of England base rate.
If we take the example above, if the Bank of England base rate rose 1% to 1.01% then the Mortgage Tracker rate in the above example would rise by 1% as well to 2.6%.
On the other hand if the Bank of England rate fell to a negative rate say-0.5% then the tracker rate above would fall to 1.1%
Tracker rates with no tie and unlimited over payments or full repayment without penalty are certainly an option as well as fixed rates with no tie in. Tracker rates, unlike fixed rates can go up or down depending on the Bank of England base rate.
It is however important to get advice from a good Mortgage Broker,who will help and advise you on the best option based on your needs and requirements.
A word about Mortgage Exit Fees.
We have looked at Fixed and Tacker rate Mortgages with no penalties or early Repayment charges. One thing you need to be aware of is Mortgage Exit fees charged by lenders when you repay your Mortgage in full.
These fees are not usually expensive,depending on the lender. Mortgage exit fees can be anywhere from £125 to £199 in most cases. So while you will not be hit with any early repayment charges on a Mortgage rate deal that has no tie in, there will usually be a small Exit Fee to pay, if you pay the Mortgage in full….
Summary.
So, in summary there are fixed rate Mortgages available without any tie in or early repayment charges, as well as tracker rates. If you would like advice on whether a fixed or tracker rate Mortgage with no early repayment charges is right for you get in touch and I can advise you on your options.