A base rate equity tracker mortgage is one of the many loans available that provide consumers with easy to understand rules. With this type of mortgage your home equity loan rate is the sum of a base rate (equal to a specific official market rate you can usually check on newspaper; e.g. Official 1 month rate) and a spread.

Usually the base rate tracker equity loans offer home-buyers the ability to get the lowest possible rates of interest on mortgages. Some banks offer “1%” interest rates and guarantee that the rates will never change during a predefined period (from a few months to a whole year).

The downside of this loan is that you are subject to repayment changes due to the market fluctuation of the base rate. Still, lenders may offer different interest rates during the interest fluctuation period to provide the borrower options to keep the interest rates low. For example you could be offered the option to block the rate for the remaining period of the loan to the then-current rate (base rate of the moment + the contractual spread).

The base rate equity tracker loans provide choices, such as allowing the borrower to select from a number of options, including an endowment plan, a capital repayment plan, and a personal pension repayment plan. The interest rate on each plan is calculated on a daily schedule.

The base tracker loans do not incorporate fees into the monthly instalments (as, by definition, the computed rate applies to the lending capital), unlike the 100% mortgage loans and other types of equity loans.

This means that the borrower will expected to pay valuation fees, legal fees, draw down fees, closing costs, stamp duties, surveyor charges, conveyor charges, originator fees, and other charges. They are not included in the mortgage repayments and you are going to pay them upfront or at the end of the loan.

So this loan, like most loans, has its pros and it has cons. Many loans are now available online, so before signing for a base rate equity tracker loan, search the internet and see what lenders are offering.

As you can see, when dealing with a base tracker equity mortgage you have to fix your negotiation on four points:

The lowest possible spread.

Do your homeworks and you’ll get a great loan.

Author: Mark Tern