Choosing a mortgage

Choosing a mortgage

Choosing a mortgage is not as easy as it may first appear – there are several issues you need to take care with, including:

• Interest Rate – The higher the rate the more your monthly repayment will be.
• Loan to Value – Perhaps now the biggest barrier in the mortgage market. The more equity you have, the bigger the choice of potential mortgages.
• Type of Interest Rate – Fixed rates do not move, trackers move exactly with base rates, discounted rates move with the lenders standard variable rate (SVR), capped rates do not go above a maximum and collared rates do not drop below a minimum. There are also now mortgages that track for 2 years, then fix for the next 3 years – currently an excellent choice. So much choice can be confusing!
• Lenders Fees – These will typically include valuation fees, an application fee, perhaps a booking fee, legal fees and deeds release fees. Be wary of a lender offering a low interest rate but high fees – your lower monthly repayments may be outweighed by the costs associated with the mortgage!
• Overhang – The practice of offering a very low initial rate, but then charging financial penalties if you try and move away within a specified period after the special rate ends. Can be more expensive over the long term.
• Flexibility – Some mortgages allow overpayments, payment holidays and underpayments. These can be useful for those with unpredictable incomes.