If you're in the market for a tracker mortgage then there are a number of things you should consider before taking the plunge.
Getting a tracker mortgage can be the best financial decision you ever make and save you large sums of money on your monthly repayments. It's essential that you know exactly what you're doing though as it's very easy to get stung.
Let's start by explaining exactly what a mortgage tracker is. It's essentially a variable rate agreement whereby the amount you repay on your mortgage is determined by the base rate of interest. So let's say you take on it whereby you pay 1% above the base rate. If the base rate is at 5% then you would pay 6% interest. If the Bank of England then decides to cut the base rate to 4.5% then you would pay 5.5% interest. It unfortunately works the other way to, so if there is a base rate increase you can expect higher repayments with immediate effect.
This brings me nicely onto my next point, which is deciding whether it is the correct time to be taking on a tracker mortgage. If it seems likely that interest rates are likely to increase in the near future then it's less likely to be a good financial decision to take on a mortgage tracker. If you don't understand the economy then either seek advice or consider alternatives to a tracker ormortgage. Otherwise it can be a blind gamble.
Introductory rates on it are usually very competitive and can last as long as two years. However, make sure you understand how much you're going to have to pay when this period ends, as it can be significantly more. A lot of people fall into this trap and simply don't budget for the increased repayments, with serious consequences.
Fortunately, despite the risks that come with them there are a number of agreements available that allow you to take precautions, should things not go your way. For instance, many tracker deals come with the option to switch to a fixed rate arrangement at any time for no extra fee. Unsurprisingly, this is an attractive option for many families on a tight budget.
Something else to consider is how long you want the agreement to last for. You can get anything from a 2 year to a lifetime tracker mortgage which lasts for the entire period of your mtgage. In the right economic climate, a short term agreement can be incredibly beneficial. Longer term deals should be considered for longer and it's even more important to ensure you have an exit option if things aren't going your way.
If you take all of these things into consideration and discuss them with your mortgage broker, then you'll have a far better chance of achieving success with your tracker mortgage.
Thomas Baugh offers more wisdom on how to get the most from your mortgage at the Mortgage Broker Site.
http://www.mortgagebrokersite.net/mortgages/tracker-mortgages
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