How to get a good mortgage deal? Well, it would be handy if you had a time machine or a crystal ball! A good mortgage deal very much depends upon your circumstances and what the future holds.
What are the mortgage options?
There are two basic types of mortgage:
- A repayment mortgage
- An interest-only mortgage
A repayment mortgage is a loan whereby the capital amount borrowed is repaid monthly along with any incurred interest. This means that, the total amount owed decreases every month and is fully paid at the end of the borrowing period.
An interest-only mortgage is one whereby the borrower only pays off the monthly interest accrued on the debt. At the end of the mortgage term the capital sum is paid off, usually, by the release of some investment or asset; an arrangement agreed at the time of the loan.
To sum up, at the end of the loan period a repayment mortgage will be paid up in full; an interest-only mortgage still leaves the outstanding debt of the original capital borrowed.
Nowadays, understandably, most borrowers are steered towards the repayment option. The interest-only loan needs more planning and has more variables, lenders tend to put a lower cap on the amounts they’ll make available. Indeed lenders are becoming ever more reluctant to offer this option.
So, the best, most secure deal, for the majority of borrowers, has to be a repayment mortgage.
A fixed or variable rate mortgage?
This term applies to how the interest is paid; either at a fixed rate or a variable rate. The most popular option is undoubtedly a fixed rate. This means that from the outset of the loan the interest is fixed at an agreed rate that will apply throughout the term of the debt.
With a fixed rate the borrower will know exactly what is due every month, no nasty shocks as interest rates suddenly rise.
Variable rate options are still being offered but have waned in popularity; history has taught us that, sudden, huge hikes in interest rates can have a devastating, often bankrupting, effect upon the borrower.
A fixed rate mortgage will probably cost more than a variable rate; however, peace of mind usually tips the scales towards a fixed rate mortgage.
- The inescapable conclusion has to be that, a fixed rate repayment mortgage is the safest and best deal available.
Best deal mortgage
There are so many lending sources available, banks and a swathe of financial advisors all queuing to offer the ‘best deals’. It can be quite a daunting task trying to decipher what is actually ‘the best deal’.
Interest rates will vary from one company to another, the borrowers previous credit history may mean some lenders won’t consider their application, or might inflate the interest charges.
By way of warning! A good sounding deal may not turn out to be quite so good when taking account of all the extra fees that may be due.
Find a mortgage advisor who puts everything upfront; no unexpected fees from solicitors, the taxman nor valuation charges etc.
How to get a good mortgage deal? Find a financial advisor with experience, find one you can trust and most of all one who will guide and advise.
A good deal is not always the cheapest deal.