With the number of lenders and mortgage products available to buyers growing at an exponential rate increase it can be a mind field trying to select the mortgage that is right for you and your property. Luckily there are some useful tips that should help you to navigate the confusing world of trackers, fixed and variable interest rates and early repayment charges.
Many buyers will only look at the monthly payment they are making, and will give little concern to the length of term of the mortgage. After all, many of these buyers never intend to finish paying of their mortgage for that home if they are intending to climb the property ladder. This means that the length of term is of little consequence to them. This is a rather short-sighted way of looking at things, since there are other things that you should consider.
One good idea when struggling to decide on a mortgage is to start with your end in mind. If you are buying your first property but know that you will be planning to start a family in a couple of years, chances are you will be thinking of moving to a bigger house within the next few years. This means that it would be counterproductive to tie yourself into a fixed 5 year deal that will not allow you to repay it any earlier. Equally, if you know that you would like to try and build equity quickly, taking the mortgage out over 35 years to get the smallest monthly payment possible may be the wrong approach. You may find it better to take the mortgage out over a shorter period; you will pay less interest overall and your mortgage debt will reduce much more quickly. Remember if you don’t keep up repayments on your mortgage, your home will be likely repossessed and you may have to consider a fast property sale through a company like TopCashOffer.co.uk.
When looking at interest rates, most lenders will offer attractive lower fixed interest rates for the first 2 or 3 years. These can offer a great deal but beware, some of these deals have hefty set-up costs. On occasion, though admittedly this would be very rare the set-up costs can actually leave you in a worse financial position than if you had chosen a slightly higher interest rate without the initial fees. This shows that it is always worth calculating the savings you expect to make. There are plenty of repayment calculators online that will allow you to project the life of your mortgage based on the loan amount, the term of the mortgage and the affect this will have on your monthly payments.
One other thing to be aware of is the APR that the rate will revert to at the end of a fixed term. You need to consider the difference this will make to your repayments so you can decide if the product will still be suitable for you after the fixed term ends. Some buyers have been seduced by an attractive initial low rate of interest but fall foul later on when this rate shoots up after a couple of years and their repayments become unmanageable. This is one of the many reasons why it pays to shop around and consider switching or re-mortgaging to a different lender at the end of your fixed period. This will allow you to fix your interest rates again for another period and avoid rising interest rates.
If you are someone who wants the certainty of knowing exactly what they will be paying, there are lenders who offer to fix payments for as long as 10 years. These products were more popular in the past when interest rates were rising more quickly. With the current low interest rates there is less demand now for these products since the interest rates for these 10 year fixed rate products are generally higher than the shorter term fixed periods. If you were to consider going with a 10 year fixed interest rate mortgage, you would be tied to that product for a long time and unable to switch to another lender if interest rates should drop. However, it is very unlikely that interest rates will drop significantly lower than they are now since this is the lowest rates have been for many years. These 10 year fixed interest mortgages do offer individuals the peace of mind in knowing that they are fixing their payments at a manageable amount for a long time.
Whichever mortgage you are considering, make sure to do your homework, shop around for the best deals, speak to a mortgage adviser and remember to select a deal that will work not only for your current circumstances but also for any future plans that you have.