Understanding The Rates On An Adverse Mortgage

The interest rate is the most important feature of an adverse mortgage , so it is important to understand exactly what you are getting when you apply for one. There are several different types of rates that may apply to an adverse mortgage and it's good to know what they are and who they might suit. There are also additional rates that apply to an adverse mortgage.

The basic rate charged by a bad credit mortgage lender on an adverse mortgage is the standard variable rate. There's nothing standard about it, though it certainly is variable. The standard variable rate on an adverse mortgage is likely to be linked to the Bank of England base rate, though they need not be the same. When the base rate rises, so does the standard variable rate. When the base rate falls, the standard variable rate on your adverse mortgage may fall as well. This will rarely be the best rate available for an adverse mortgage.

Another type of rate that is available for a subprime mortgage loan is a tracker rate. Mortgage companies for bad credit will offer this rate, which tracks the Bank of England base rate by a set percentage. This means that the rate you pay on an adverse mortgage rises and falls with the base rate. This is great if the base rate falls, but may not be so great if it rises. Some mortgages have a tracker rate for a period, followed by the standard variable rate, while others are lifetime trackers.

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Discount Mortgage Loan

You may also be able to get a discount adverse mortgage. This is usually a discount off the standard variable rate and it tends to be for short periods. At the end of two or three years, the adverse mortgage will revert to the standard variable rate, which is when your finances could start to feel the pinch. In the short term, though, this may offer a good way to make sure that you are able to meet the repayments on the adverse mortgage.

Fixed rates for mortgage loans for poor credit are exactly what they sound like - rates that are set at a certain level for a pre-determined period of time. This may be as little as two years or much longer, with many companies offering ten and 15 year deals. However, most fixed rate deals for an adverse mortgage will be for two, three or five years. The advantage of a fixed rate subprime mortgage is that you know exactly what your mortgage payments will be during the period. However, if the base rate falls during the fixed rate period, you could end up paying over the odds for your mortgage. Many fixed rate deals also impose early redemption charges if the adverse mortgage is repaid in full during the fixed rate period.

Finally, with mortgages for poor credit, mortgage lenders will impose an interest rate loading depending on your credit status. This can add several percentage points to the quoted interest rate. For this reason, it is worth doing a rate comparison or seeking professional advice on your adverse mortgage.