Getting the best Rates FAQ
Why not just go with my current bank/building society?
It’s perfectly normal to want to use a lender that you’re already using at the moment. However, they can only offer you mortgage deals they have and cannot access other lenders products. There is a good chance that a more suitable deal could be found elsewhere. The consequences of using your current bank can sometimes mean a significant financial loss over time. No one lender is the same as another. Every lender will have its niche speciality, whether you’re a first time buyer, landlord, have poor credit or are overseas. Also, remember that lenders can have different lender direct and intermediary deals, so comparing them all in order to benchmark rates can help to ensure that you’re getting a good deal rather than being short changed for being a loyal customer.
Should I get a fixed rate mortgage or a tracker?
No adviser can predict the market, and as a result, very few will offer any advice on what is likely to happen to interest rates in the short or long term. A good adviser however, will gauge from your attitude and understanding, which mortgage from the thousands of options is best suited to you. The different rates are suitable in different scenarios, and often, the ideal rate should have something to do with the borrower’s character, personality and personal financial circumstances. For example, tracker mortgages and other variable mortgages may be more suitable to the person who is less averse to risk or the property investor. On the other hand, a family may want to choose a safer, more secure and more predictable investment. In this instance a fixed rate mortgage would likely be the more preferable solution. You should only really consider getting a variable mortgage product, such as a tracker rate mortgage, if you can comfortably afford repayment amounts that are higher than the amount quoted at the outset. This is because variable mortgage rates can change depending on what the bank of England’s base rate is set to. Getting a mortgage is a very serious financial commitment and should not be taken lightly. Be sure you’re well aware of all the facts and implications before taking out a mortgage.
I’ve seen some ‘headline’ low rates. Should I trust them?
There’s more to getting the best mortgage than just having the best rate. Say, for example, HSBC offer you a 2 year 2.5% tracker mortgage, with a £999 arrangement fee, £300 valuation fee, and legal costs to pay. It looks likely to save you £50 per month over the next two years, when compared to a higher 2 year 3.49% tracker rate, with no fees with Santander. The HSBC deal may seem more attractive when sold to you by monthly payment, but unless you are desperate for the lowest monthly outgoing, it’s important to dig down and look at the ‘total cost’ over the 2 year period. Fee’s like arrangement charges, valuation fees or solicitors costs all add up, and as in the example above, a £50 a month saving actually isn’t that great when you do the maths… MONTHLY = £50 x 2 years = £1200 saved. FEES = £999 + £300 + ~£350 (approx legal costs) = £1649 paid out. TOTAL COST = £1649 – £1200 = £449 additional cost over the 2 years. This is why it’s best to speak to a qualified independent financial advisor that had access to the ‘whole of market’ and who knows their way through the different fee’s and charges that some banks may not fully explain.
Factor in the mortgage term
Another important aspect to look into when comparing the best mortgage rates is the overall term of a mortgage. Generally speaking, the shorter the term of the mortgage, and thus the higher the monthly payments, the less you will pay out overall. It can be wise to attempt to pay it off over as short a time period as possible, as long as it can be comfortably afforded. In times of plenty, a borrower may be able to overpay. Banks will often offer an attractive introductory term but this will almost certainly increase after the given time period. Re-mortgaging after this period could end up outweighing the short term gains.
How much does my deposit effect the rates I will get?
UK mortgage rates vary heavily depending on the level of equity already owned. This will come in the form of either the initial house deposit or in the form of equity already owned on a property. The greater the gap between the initial purchase price of your home and the overall house price, the more risky the loan is to the lender. The more risk it will be to the lender, the higher the mortgage rate will be paid overall. You’ll see that when you’re using our mortgage search engine, or when you’re viewing our best buy tables, a maximum LTV will be stated. Try to overpay as much as possible to begin with in order to bring down your overall LTV as much as possible. First-time-buyers or people with bad credit often struggle with this, and a whole of market independent financial advisor may have the clout and know-how to help you out.
Should I be paying Broker Fees?
Nearly all IFA’s charge a fee of some sort. This is because commission from financial products like mortgages is these days nowhere near where it used to be, and costs are high. Many mortgage brokers and IFA’s need to charge fee’s to survive in the industry – many that have persevered with a no fee ethos have gone out of business in the last few years as the market declined. Truly independent advisers don’t make their money pushing certain high commission products. The fee payment system helps ensure that the mortgage broker is acting in a more objective fashion and you are receiving the best advice. It is normal for Independent mortgage brokers to charge initial consultation fees or for a portion of the fee to be paid ‘on application’ and some to be paid ‘on completion’. This ensures that if for whatever reason the mortgage doesn’t go through, they still cover costs and aren’t effectively working for free. In most instances it’s a good idea to find an IFA that can give advice and quotes you up front before any payment is made.
Flexibility is another important variable to consider. You may want the ability to overpay, underpay, take a payment break, borrow-back money, port your deal to a different house, and more. Most mortgages nowadays come with a certain level of this ‘in-built’ anyway, but there are specialist options that cater for larger allowances or further flexibility. Mortgages that allow this are certainly more attractive than those that don’t, but check that it’s not something you’re paying for that you don’t need.
How do I know if i qualify for the best mortgage deals?
You don’t really, not until you apply. To have the best idea it is always best to talk it through with an expert to make sure you get it right first time. Multiple applications for credit can leave numerous searches on your credit file, which can harm your chances of getting any mortgage, especially the ones which require top level credit scores. We can help you find access to a fully authorised, professional, and proven broker service. Give us a call or make an enquiry today.