Top 10 tips when choosing a mortgage
Buying a house is one of the most expensive purchases that we make in our lifetime; so choosing the right mortgage is crucial. With over 10,000 different mortgages out there, it can be quite daunting.
Moneyfacts.co.uk has ten top tips for helping you choose a mortgage
1) Shop around
Mortgage advisors will be able to help you look at your own financial circumstances and tailor you with a suitable product. But before you book an appointment, search for a mortgage with the help of our Mortgage Best buys to give you a much better idea of what sort of rate and mortgage deal you should be aiming at.
2) Percentage fees
When choosing a mortgage, you should always look at the percentage fees attached to the product. Some of the lowest rates available today will come with percentage fees of up to 2.5%. This means that a mortgage of £150,000 you could have to pay £3,750. With such high fees you need to calculate exactly how much you will be paying.
3) How will you pay?
Think about how you plan to pay all of the associated costs with the mortgage. Some mortgage lenders will ask for the set-up fees upfront, whilst others will add them into the cost of your loan. You therefore need to decide what is the most suitable for your circumstances.
4) Tie-ins
Many mortgage deals will tie you in for an agreed amount of time, which means that if you exit the deal early you will be hit with a redemption penalty. Make sure you are aware of how long you are tied in for, and think about how your circumstances may change over the period. Early redemption penalties can be very high, and you don’t want to incur any more charges than you have to.
5) Exit fees
Once your mortgage deal ends, you need to check to see what fees you will be charged if you want to change to another lender. Some lenders will fix the exit fee at the outset, but unfortunately most can still charge what they want.
6) Flexibility
Depending on your circumstances, you may suit a mortgage that allows you to overpay, underpay or take payment holidays. You can then fit your mortgage payments to suit your needs.
7) Higher lending charge
If you want to borrow a high percentage of the property’s value, then you need to be aware of higher lending charges. These are often payable on mortgages with over 90% loan to value, and can be as high as 12%! As you can see, doing your homework first can literally save you thousands.
8) Incentives
Some mortgage products will include incentives such as a free valuation, free legal fees, a cash rebate or free insurance for a set time. However, it’s important that these freebies do not fool you, as they are often worked into the total cost of your deal. Calculate how much these incentives will affect the overall costs – because what you see is not often what you get.
9) Affordability
It's crucial that you work out how much you want to borrow, and how much you can physically afford. Remember that you will have to pay council tax, utility bills and insurances, not to mention the TV licence! Under no circumstances should you agree to a loan that you will not be able to or struggle to repay.
Our budget planner can help you do this.
10) Ease of Application
Last but not least, when you have found the right mortgage for you, make sure you look at the application form before signing on the dotted line. Beware that some online applications take a long time to complete, so pick which method you feel most comfortable with - after all, you may be tied to the mortgage for a long time.
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