How to decide whether a mortgage is right for you
What are you looking for in a mortgage? Most people might truthfully say that they are simply looking for the lowest possible rate, but there is actually much more to consider. When you are looking at a mortgage – which these days could last up to 35 years – it’s worth understanding all the details before deciding if it is right for you. You could have a long time to regret it if you make the wrong decision.
Mortgages are actually a lot more complicated than they first appear. You can of course go online and look at the mortgages available on a comparison website. It might let you have some idea of what is out there. But although the site might seem to find the best rate for the loan you want choosing a mortgage is a process far more complicated than simply opting for the lowest rate or the best incentives.
The best option for you may be very different from someone who seems to be in similar circumstances. What’s more, the number of mortgages on the market is mushrooming, leaving you with almost an overwhelming – and confusing – level of choice.
Do you want a repayment or interest-only mortgage?
This means you choose between paying off the amount you’ve borrowed and the interest as you go along or only paying back the interest.
Bear in mind that with an interest-only mortgage you’ll need to be able to show the lender that you have a strategy or investment plan that will pay off the mortgage when it is due. It’s much harder to get an interest-only mortgage now and lenders don’t always offer them.
Do you want fixed monthly payments?
You may want to have certainty about your future monthly payments. If you need that certainty and you can find a reasonable and affordable deal, consider a fixed-rate mortgage.
Do you want to start with the lowest possible rate?
A low start rate while you’re dealing with the costs of a new home can be a good idea. But beware hidden costs, such as a large arrangement fee, which can make that low rate far less attractive. If you’re willing to pay a large upfront arrangement fee, you can often get a lower interest rate. If you go for a fee-free mortgage, you’ll probably have to pay a higher rate.
Do you want to add your mortgage fees into your mortgage?
If you can’t afford to pay these fees right now, you should find out if you can add them to your mortgage. It sounds a cheap way to borrow – but remember, you’ll pay interest on that extra debt for many years to come.
Do you want the flexibility to overpay, underpay or take payment breaks?
Some mortgages allow you to overpay sometimes – in other words, pay more than your normal monthly payment. Some allow you to underpay or even take a short mortgage holiday where you don’t have to repay any money at all. Whether these features are available to you will depend on the mortgage terms and conditions as well as your financial circumstances.
Do you want to use your savings to help pay off your mortgage sooner?
You could use your savings to help you reduce your outstanding mortgage and pay less interest. If you want to do this, an offset mortgage will give you the most flexibility.
Get a mortgage broker to help
If all this seems complicated, there is a simple solution. A mortgage broker can give you an expert guide to all the mortgages on the market – including deals that are not generally advertised. They can help you find the best mortgage deal, taking in all the factors, including your particular needs or financial advantages that the automated systems of comparison sites simply can’t pick up on.
When your needs are out of the ordinary, such as interest only and buy to let, a mortgage broker may be the only way to get access to the products you need.
Mortgage Brokers have to be qualified to give you mortgage advice – which means protection for you if things go wrong, and you are sold a mortgage that turns out to not be what you really needed.
Once he or she has helped you choose the right deal, your mortgage broker can help with your application. Applying for a mortgage has got a whole lot more complicated. You will now find yourself faced with a lot more forms when you apply, which can require details about everything from your family planning to how much you spend at the pub.
If your mortgage application does hit a snag, then a broker can also help by using their personal contacts with lenders to find out what has gone wrong and how it can be resolved.
When you need to think about your mortgage, contact our borrowing team.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.