Chapter 5 of 617% of exam
Mortgage Products and Repayment Methods
The range of products an adviser must be able to compare: repayment versus interest-only, and the main interest-rate options — fixed, tracker, discount, capped — plus features such as offset.
Repayment methods and rate types
A capital-and-interest (repayment) mortgage clears both interest and capital over the term, so the balance reaches zero; an interest-only mortgage leaves the capital to be repaid separately. Interest-rate options include fixed (rate set for a period), tracker (follows an external benchmark such as Bank Rate at a set margin), discount (a set reduction off the lender's standard variable rate) and capped (variable but subject to a ceiling). An offset mortgage sets linked savings against the mortgage balance to reduce the interest charged.