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Tracker Mortgage
Posted Date: 19 Apr 2008 Resource Type: Articles/Knowledge Sharing Category: General
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Posted By: Bala Member Level: Diamond
Rating:  Points: 5
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Tracker Mortgage
Tracker Mortgage is a mortgage that has the rate of interest that follows the base rate set by the Bank of England. In Mortgage Tracker, the interest rate constantly differs due to the fact that it depends on the Bank of England's base rate which is always changing.
Tracker Mortgage has been used by more and more people in the last few years. The Mortgage Tracker is a mortgage with variable rate of interest as result of which the borrower's payments change according to the interest rates in the external market. When the base rate goes up, the borrower's monthly interest payments mortgage also go up and when the base rate goes down, the borrower's monthly interest payments go down. Thus, as seen in Tracker Mortgage, the borrower benefits when the base rate goes down, because then he has to pay less money as his monthly mortgage installment.
The Mortgage Tracker offers low rate of interest to the borrower in comparison to the flexible or fixed rate mortgages. The people who go for Tracker Mortgage are those who are looking to pay low amounts of installments in the start and also those who can take the risk that their installments could increase due to the growth in the base rate. The lenders of Mortgage Tracker often specify the minimum interest rate that the borrower has to pay in case the base rate falls below expectations. The lender does this in order to protect himself from the borrower, paying a very low rate of mortgage.
The advantages of Tracker Mortgage are that the borrower has to pay cheap monthly mortgage interest payments when the base rate has gone down as a result the borrower is able to save his money. Also, the borrower has to pay in the start low amount of money as installment and thus the pressure is less on him for a couple of years. The disadvantages of Tracker Mortgage are that the borrower has to pay high amounts of monthly mortgage interest installments when the base rate goes up and this puts added pressure on the borrower. Also, many times the borrower is unable to pay the increase that takes place in the installments and thus defaults.
The various types of Tracker Mortgage are:
Fixed rate Tracker Mortgage
Flexible rate Tracker Mortgage
Offset Tracker Mortgage
Tracker Mortgage is usually opted for by those who are optimistic and for those who are able to take the risks of paying higher mortgage installments in case the base rate goes up.
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