Getting a mortgage approved can feel like a steep mountain from understanding rates, all that paperwork to picking a lender. Before you put yourself off, listen up to these mortgage tips. With a bit of knowledge it’s more than possible to reach the top. Furthermore, according to one of our mortgage experts, an experienced broker who’s been securing successful applications for over 24 years “it can actually be quite fun”.
Here are mortgage tips to know that can keep you one step ahead and make the process easier without breaking a sweat.
What Is A Mortgage?
Before we get ahead of ourselves, let’s start with the basics. A mortgage is a loan secured and tied to your property. You agree to pay back the loan over a certain period subject to an interest rate, typically over a 25 – 30 year period. Until you pay off your mortgage, the lender owns part of your home. You can pay off a mortgage early subject to a termination fee. However, checking this before taking out your loan is important. Wanting to take on a mortgage with a partner or friend? Yep, this is possible. This is classed as a joint mortgage and you are both responsible for payments.
What Is The Difference Between Repayment and Interest Only Rates?
The first thing to decide when choosing a mortgage is whether to go for repayment or interest only. But what’s the difference? Our expert explains that,
“What is best for you depends on your circumstances, goals and budget.”
You may feel more comfortable on a repayment as knowing you are paying off the debt. This means by the end of the term you would have paid off the full loan. Interest only means you will still have to pay off a sum at the end of the period from another source of savings. Both repayment and interest only come with different deals and periods.
Moreover, Rates are only guaranteed for a set time after which you will be put on a different product. Having a good chat with your lender or broker about the long term repayment plan is wise to protect your investment. Many buyers are not fully aware of what would be best for them, having an experienced broker advise you guides you in the right direction for the perfect deal for now and the future.
Also watch our Lawtee podcast: Single And Ready To Commit To A Mortgage?
What Is The Difference Between Fixed, Tracker And Variable Mortgage Rates?
Mortgages can be set at different rates. When researching you may come across terms like fixed, tracker and variable. So what’s best for you? Understanding the differences is key. Variable rates can change at any point, rising and falling roughly according to the Bank Of England base rate. While this can be beneficial if interest rates drop it also runs the risk they can rise, increasing your payments.
On the other hand, Fixed rates provide the security of a set rate for a certain period usually between 1 – 5 years. However, if the interest rates drop you could end up at a higher rate. And tracker mortgages – what the heck are they? They strictly follow the Bank Of England base rate. Not sure what to choose? Therefore, it is best to speak to an expert who can provide some context on the economy, discuss your circumstances and find a product that provides peace of mind.
How Can A Mortgage Broker Save You Money?
Another decision to make when choosing a mortgage is whether to go through a broker or directly to the lender. The difference can have a big impact on the choice of loans you get access to. A mortgage broker has access to the wider market and tends to have a more in depth knowledge of the market. They will know the lending criteria of many lenders and can save you time and the costs of wasted applications.
While they have their own fees, the personal service, support and mortgage tips are often more than worth it. To get started booking a free consultation with a mortgage broker makes sense. They can answer any questions and give you an idea of your borrowing potential and what would be right for you. Ultimately you want to work with someone you feel comfortable with, listens and has your best interests at heart now and for the future.
So, In A Nutshell
A mortgage is a big decision so take your time and do your research. From understanding rates, the different types of product to repayment periods you want to be clear on what your options are. Speaking to an experienced mortgage broker can clear a path towards the best options tailored to your circumstances. They are there to get you to the top of the mountain, keeping you motivated and guiding you through the decision process. Hence, ensuring you make the right one for you.
If you’ve got more property law related questions, speak to our senior partner, Shah Ali.
