HOW TO CHOOSE THE BEST MORTGAGE FOR YOU?

Tags – How to Choose a Mortgage?

Where on earth do you start when looking for a new mortgage? Whether you’re a first-time buyer or a longstanding homeowner seeking a remortgage, the choice can be overwhelming!

Starting the Process

So, you’ve found your dream home, where do you start?

If you’ve sold a house, you’re likely to have used a local estate agent like us, in Wolverhampton.

However, with regard to any sale, the vendor’s estate agent will keep both vendors and buyers up to speed.

Alongside the essential conveyancing specialist, another professional invaluable in the process is a mortgage broker.

Whilst your bank or other lender can be a great place to start, they offer diverse finance services for different circumstances. As such, they will have limited mortgage offers.

In comparison, mortgage brokers have access to literally thousands of mortgage deals. Moreover, a mortgage broker specialises in mortgages and will be aware of all the latest offers

Calculations

Once you’ve secured the services of a mortgage broker, you will find a range of support and tools at your disposal.

For example, a mortgage calculator is a great way in which to help calculate what finance is available to you.

Together with earnings and property values, this information will allow your adviser to give the best advice. As a result, they will be able to drill down on the most suitable deals specific to your circumstances.

Fixed Rate Mortgage

A fixed rate mortgage is a great option if you want to know exactly what you’ll be paying.

The interest you pay is fixed regardless of the interest rate.

Consequently, you’ll pay the same amount for a term of usually between two and five years. An advantage to a fixed rate mortgage is that you will know exactly what is due each month.

Conversely, the downside is that it is possible that interest rates will go down and you won’t benefit.

Variable Rate Mortgages

With a variable rate mortgage, the interest you are charged can change and there are options. 

Standard Variable Rate (SVR) Mortgage

A standard variable rate is the normal interest rate lenders charge and as such, this mortgage is a good flexible option.

However, the main disadvantage is that rates can change at any point.

Discount Mortgage

Whilst a discount mortgage can be a sensible choice, it pays to look around for deals.

Lenders offer a percentage discount off their SVR charged for a specific duration.

However, not all lenders work to the same standard variable rate. Therefore, it’s not just a case of comparing one discount offer with another.

Tracker Mortgage

Usually with the same sort of durations as a fixed rate, a tracker mortgage moves in line with the base rate plus a few percent.

Consequently, if the base rate reduces by 0.25%, your mortgage interest rate will do the same.

Capped Rate Mortgage

Similar to the Standard Variable Rate Mortgage, this option moves in line with your lender’s SVR.

However, it’s capped and therefore the rate can’t be charged above an agreed level.

Although this mortgage can work well as it’s variable, it’s important to bear in mind the cap tends to be set quite high. 

Offset Mortgage

Offset mortgages are linked to your savings and current account and you only pay interest on the difference.

Whilst there is a danger of having all your eggs in one basket, your savings can act as an overpayment and can help reduce your mortgage.

All mortgages have two factors to watch out for in common. There is the possibility of arrangement fees and also penalties for moving to another option. However, if you have engaged the services of a mortgage broker, they will point these out to you.

Equally, these costs will be included when comparing all options.

To learn more, get in touch with us today.
This blog was written in collaboration with Court of Protection Solicitors: Thaliwal & Veja.

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