Those days when banks fell over themselves to offer mortgage are long gone. Still, you can increase their chances of taking advantage of available home loans by getting a mortgage makeover, starting with knowing your sums.
So if you want a good deal, you must know particularly how much you should borrow, how much your property is worth, and the mortgage percentage of your home’s value, or loan-to-value.
You can figure out your home’s value by looking into similar properties for sale, noting you need to remove a fair discount, and making use of an online property price calculator. The best mortgages are given to those making larger deposits of 40 per cent at minimum, but don’t fret – if this is too much for you, lenders can offer options to those who would like to borrow 75 percent or below. It becomes trickier to get a good rate above 75 percent, but you can still find a mortgage. Note that higher loan-to-values make mortgages more expensive.
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The length of the deal also has an impact on the rate. Deals good for two years are less expensive than those that end in five years. Mortgage rates are hinged on a whole range of interlinked factors; your central bank’s base rate and its expected path; how much a bank or building society must pay savers to get their cash and lend the money out as mortgages; and money market funding costs. Before choosing a mortgage, you need to consider all of these.
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You also need to decide whether or not you need the security of a fixed rate, which is recommended if you think you would struggle if there was an increase in monthly payments, or you are ready to risk a tracker and pay a bigger amount in case the base rate goes up.
Then again, the rate is not everything you should consider. Lenders also gain profit from fees mortgages come with. These can be a lot, making a seemingly cheaper mortgage turn out more expensive, so it’s a must that this is added this to your loan’s overall cost as you compare mortgages.
Remember, the deal with the lowest rate is not necessarily the best mortgage. Super-fee mortgages, where low rates are offered in exchange for a hefty arrangement fee, indicates that borrowers with smaller loans can end up out of pocket if they opt for a bargain rate. As a rule of thumb, bigger mortgages equal high fee/low rate deals, but be careful with percentage-of-loan fees, which are higher-priced than bigger loans.
Finally, watch out for charges to be collected after the mortgage, including early repayment charges, exit fees and more, along with costs for property valuation and the legal purchase process. All of these can mount up, but there are some deals that can work out for you if you just ask your lender for options.