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When you find your perfect property, it’s often before you have thought about how you are going to pay for it. A Variable Rate Mortgage could be suitable for funding the purchase of your property. As interest rates are at their one of the lowest points, Variable Rate Mortgages have become increasingly attractive. The market for this type of mortgage has increased and therefore lenders have started to offer very attractive rates to obtain your business.

A variable rate mortgage is a loan issued by a lender which is secured against a form of your property. The variable rate part is the cost to you in terms of interest. This is calculated using the Bank of England base rate. The base rate is currently at one of the lowest points it’s ever been, therefore variable rates that are set by lenders are also at one their lowest. This is due to lenders using the base rate as a guide to setting their own interest rates.

The lower interest rates that variable rate mortgages usually have on offer are very attractive; however the slight downside to this is that mortgage rates can be changed at any time. If the Bank of England decided to increase their base rate, the variable mortgage rate would also rise. Therefore, although you will be paying less for your mortgage, if the rates were to increase, your monthly mortgage repayments would also increase due to the alteration of interest rates. However, if there was a reduction in the Bank of England base rate, this would be of an advantage to you as the variable mortgage rate would decrease which in turn would reduce your monthly mortgage repayments.

Once you have searched and found the home that you want to buy, you will need to do some research for most attractive Variable Rate Mortgage available. With the introduction of the internet, lenders are not only competing against each other for business in the high street but they are also facing stiff competition from specialist online lenders.

If you are bewildered by the amount of information available to you regarding mortgages, it’s worth checking with a financial advisor first. You can use the advisor from your existing lender or contact an independent financial advisor who will be happy to assist with your search. If you know what you are looking for, you can head straight for the internet, where online applications are very welcome, which not only saves you and the lender time but you will usually be given an immediate response with regards to acceptance.

When applying for a variable rate mortgage, you may be eligible to borrow 90 to 95% of the value of your property, depending on lender and which product you have chosen.

The application will be based upon your income of which if you are a sole applicant, you can potentially borrow 3.5 times your salary or more depending on lender. If you are applying in joint names, the lender could potentially loan you either 3 times your joint income or more depending on lender.

Your application will be also based on your credit history. All lenders are required to apply for credit checks on applicants. This gives the lender the ability to assess your risk when lending the money to secure the mortgage. They will look at personal details such as monthly outgoings, employment history and any outstanding debt you may have.

With variable rate mortgages, there are additions to the standard product that some lenders may be able to offer. There are certain types of variable mortgage rates that give you the opportunity to make monthly overpayments on top of your monthly mortgage amount without penalty. This gives you the benefit of reducing the amount of interest and capital balance owed whilst reducing the term the mortgage is to be repaid by. However, lenders may impose a maximum amount that you can make overpayments on.

There is often no redemption penalties associated with variable rate mortgages, if you move and want to re-mortgage to another lender or if you repay your mortgage earlier than the agreed term, you will not be charged for doing so.