Finding The Best Mortgage Deals : Your Comprehensive Guide
When looking for an appropriate lender, start off with the following to options:
• Visit your bank or building society and see what offers are available; this is particularly useful if you have an existing mortgage with the same bank. Use comparison information available and express an interest in finding out more about their mortgage services.
• Make an appointment with a whole of market mortgage broker (see section on brokers) and listen to his or her recommendations – make sure give all relevant details in order that your entire circumstances can be used to find the best offer
A whole of market mortgage broker will search the whole of the market for the best deal for your circumstances. Banks and buildings societies will offer you only their own services and they may have a market beating offer which they do not make available to mortgage brokers, however your circumstances may not fit the offers criteria. That’s why it’s essential to shop around and compare quotes from other providers as well as with a mortgage broker.
Mortgage Comparison Tables
Be sure to view a few mortgage comparison tables during your search – never focus solely on interest rates. A mortgage includes a variety of other services and costs that are worth due consideration. Below is a selection of considerations beyond interest rates:
• APR (Annual Percentage Rate) – this accounts for the level of fees plus your quoted interest rate. To demonstrate, you may be charged arrangement and booking, plus fees for an evaluation. In practice it’s not easy to come up with an entirely accurate measure of APR. Remember that APR does not cover the price of any insurance that you hold separately. APR is still a generally good aid in comparing deals.
• How long is the deal contractual? Bear in mind there will be charges if you leave the contract prior to this date
• Is interest accrued daily, monthly, yearly?
• What will the rate be when the opening rate stops?
• How flexible is the service when it comes to overpayments, are there are fees?
• Is it portable?
• What is the highest loan to value (LTV) – this being the top percentage level of the house’s value that the provider will offer. The lower your deposit, the higher a loan you’ll need. For example, if you can offer only 20% as starting equity, you require a mortgage at or above 80%.
Choosing a Lender
With the huge number of mortgages available, it’s worth looking into a whole of market mortgage broker who is registered by the Financial Conduct Authority as well as going to your existing and high street lenders.
The terms ‘adviser’ and ‘broker’, by and large, refer to the same people – a consultant who can help you choose the correct mortgage for your circumstances.
With mortgages there are almost always some additional fees involved – often to the tune of thousands. For example, valuation of your home and solicitor’s fees. Some lenders will take on some or all of these costs as part of their offer in order to attract your business.
Your mortgage provider may charge a fee for their product which will generally be added to the mortgage loan amount. They must be up front on costs, but, always read the final agreement carefully to make sure there aren’t any unseen charges.
You may also have to pay a charge for early repayment, if you settle part of the loan early. These charges can be very high if you have a fixed rate or discounted mortgage.
Putting down a deposit means a proportion of the property’s value will be paid upfront. Deposits are usually upwards of 10% on the property’s value although some properties demand a higher deposit.
The amount of your deposit, in most circumstances, does not dictate the size of your loan but it often affects the interest rate. A higher deposit reduces your LTV. This is the amount of the loan as a percentage of the property’s total value.
High LTVs for the most part mean high interest rates, since they are less assured from the lender’s perspective. The level of property that you’ve paid using your deposit is known as the “equity”.
ISA (independent Savings Account) mortgages are a clever and legal route to save capital without interference from the tax man. The successor to the PEP (Personal Equity Plan), there are two options with ISAs: Maxi and Mini – either choice lets you set aside a maximum of £7000 tax-free annually. You are allowed one Maxi type ISA or a maximum of two Minis via separate providers. Investment in ISA accounts can come in the form of money or shares. The Maxi option is used more commonly with mortgages as it consists of stocks and shares and makes for a good repayment vehicle. Into the bargain comes the option with an ISA to terminate payments at any time. That being said, it is still an investment, and gives no guarantee that it will cover your capital as payments are entirely down to you.