How to get the best mortgage deal.
It's a matter of blending your hopes and dreams with the closest matching mortgage product to achieve them. Turning that dream of your new home into reality takes a bit of time and effort and then you're on your way.
The mortgage market is constantly changing. It always has. New mortage rates, different mortgage products and so on.
Being a whole of market mortgage broker means that even if there's only one mortgage out there that is right for you, then it will be found.
The benefits of Personal Advice
The best mortgage is the one that is most suitable for you. Getting it wrong can be costly. That's why there are things to talk through so that my recomendations can be made for you personally. Time, effort and attention to detail are needed but it's worth it because it avoids any costly mistakes.
Once we've done this the mortgage software I use will come into effect and drill down to what we're looking for.
Just some of the benefits of this software to you are
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I'll be searching the whole mortgage market on your behalf
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The results are impartial and based on your own preferences and needs
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You'll save a great deal of time and feel confident in the result
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You'll avoid any costly mistakes
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You
If you would like to discuss your mortgage needs, you can call me directly 01626 337722 or you can arrange a free call back.
Reviewing your existing mortgage
It's usually worthwhile having a look to see whether it's cost effective to change lender to get a better mortgage deal. Perhaps your initial deal is coming to an end. The expiry of a fixed-rate deal provides you with an excellent opportunity to do this.
The process is very much the same except you usually incur less costs such as legal fees than buying a property. It's free to find out since you will only incur any charges if you decide to act on the information.
What's more, you'd only act on the information if it was in your interests to do so having taken any costs into account. So on balance, there's every reason to review your mortgage without any downside.
If you're on your current lender's standard variable rate, when rates are low you may be better staying with them.
But there are times when you might have to change such as you're wanting to raise further capital and your lender won't help. Or it can often affect couples who are separating and one of the party needs to take over the whole mortgage on their own.
Here's a worked example that demonstrates how much difference in the costs there can be between lenders.
Compare and save
Suppose you're re-mortgaging and simply want to find the cheapest mortgage over the next 5-years. For this exercise I'm ignoring features like payment flexibility or a number of more personalised features that could be taken into account.
Say you want to borrow £120,000 on a repayment basis over 15 years and had £40,000 equity so the property is worth £160,000.
You want to compare the total that would be spent over the next 5 years to find the cheapest.
We need to account for all fees (survey, booking fees etc.) and not just the mortgage payments.
On this day the search returned 267 mortgages.
The cheapest mortgage was £834 per month over 5 years with a total outlay of £51,400.
The highest outlay was £1084 per month over 5 years with a total outlay of £68,132.
Difference between the two is a hefty: £16,732 over 5 years.
That means that if you get it right you would be saving up to £278.86 per month, every month, for the next 5 years. Quite a saving and demonstrates the difference between the extremes.
Comparing the cheapest with only the tenth lender on the list also gives a surprisingly high amount of money saved.
The tenth cheapest lender came in at £884.62 per month giving a total outlay of £54,518.
A difference of £3,118 over the 5-years, which is still the equivqlent of £51.96 per month more over the 5 years. So real savings and it's free to find out.
So if you'd like to find out if you could improve on your current arrangements just call 01626 337722 or arrange a free call back.
Sometimes playing one off against another can pay
Sometimes the best thing is just pointing you in the right direction. For example:
Mrs D (name withheld), contacted me towards the end of 2007 for a mortgage review. She'd been contacted by her existing lender advising her what they could offer when her existing fixed rate deal ended.
There was nothing wrong with the mortgage rate on offer, which in fact was competitive, but her lender wanted to charge her a £1,500 fee to go onto the new one. Following the review, she was able to obtain an alternative that was slightly cheaper over 5 years. But it got better.
Confident that she had a viable alternative, Mrs D called her bank to let them know that she would be changing lender unless they could "do something" about the £1,500 fee. In this instance, rather than lose Mrs D for good, they waived their £1,500 fee!
Now obviously no one can promise the same result but a little help can make a difference. One thing I do ask of you is that you provide me with accurate information to save wasting time and resources comparing the wrong data.
Let's take a look at the ways a mortgage gets repaid.
Different mortgage repayment methods
I know that many things that we're not familiar with at first can seem bewildering. Mortgages are no different .I always find it's the jargon that adds to my confusion. So If you're new to mortgages, the next two sections should help.
How are mortgages repaid?
Essentially, there are two key types of repayment method – repayment and interest only.
Repayment mortgage.
Here you pay some interest and some of the loan (capital) off each month, and the capital reduces over time. The loan duration is usually 25 years but doesn't have to be. The longer the term the lower the monthly outlay. The shorter the term the higher the outlay.
Advantages
- Providing you've kept up with your payments, you're guaranteed to pay off your mortgage at the end of the term.
- If you run into payment difficulties your lender might allow you to reduce the monthly cost by either extending the original term or temporarily allowing you to pay a reduced amount.
- Some mortgages allow you to make overpayments so you can substantially reduce both the amount of interest you pay overall and you'll pay it off early.
Interest only mortgage
Here you pay the interest to the lender each month and a seperate amount invested into a savings scheme to build up the sum needed to pay off the mortgage at the end of the term.
All you pay the lender each month is the interest on the amount borrowed. At the end of the term you will need enough funds to pay back the amount borrowed. It is usually recommended that you make a separate payment each month on top of your mortgage repayments into
Once you’ve identified the way in which you want to repay the money lent to you, narrowing down the choice becomes easier. It is simply the case of finding the best deal.
Repayment
Taking out a mortgage is a pretty big step, whether it’s your first or you’re moving up the property ladder. As the most sizeable loan you’ll ever take out, choosing the right type is essential. The choice, whilst at first glance may seem bewildering, is not as complex as it appears.
The different types of mortgages
There are a number of alternative types of mortgage that can be available at any given time. The most common are:
A Variable Rate Mortgage.
Where the amount of your monthly repayment is linked to the mortgage interest rate charged by your lender. If the mortgage rate is increased, so does the cost of your mortgage.
When interest rates fall so does the cost of your mortgage. The change in your monthly payment is calculated to ensure that the mortgage loan is on course to be repaid within the agreed term.
Tracker Mortgage,
A variation of a variable rate mortgage. In this case your mortgage rate is guaranteed to follow the base rate by a specific percentage difference. However, lenders often reserve the right to vary the percentage difference if it is in their interests to do so.
An Offset Mortgage
Gives you the option of linking your mortgage to your savings account and/or current account balances. Instead of receiving interest on the savings and/or current account balances, you will pay no interest on the equivalent amount of mortgage.
Typically your mortgage rate will be higher than any rate you could earn from your savings or current account (and that’s before tax is deducted from the interest earned). There is a clear gain therefore in offsetting.
This factor, coupled with making either regular or occasional over payments to the mortgage, has an extraordinary impact on how much sooner your mortgage can be fully repaid.
I never cease to be amazed at how many years you can reduce your mortgage by when you do this.
A Current Account mortgages (CAM)
Combines your mortgage, your current account, your savings account and even your personal loans and credit cards into one account. Your salary is paid into this account, something insisted upon by some lenders, and should you not spend all your income at the end of the month, that amount is taken off what you owe on your mortgage.
Fixed Rate mortgages
Where the interest rate charged is fixed at a certain level for a set period of time. During this period you would be protected from any increase in monthly payments, caused by an increase in variable mortgage rates.
You would not benefit from any decrease in monthly payments caused by a reduction in those rates. However, during the fixed rate period, you would know exactly how much your gross mortgage payments would be.
Capped Rate mortgages
It's a variable rate mortgage, with a specified maximum interest rate that can be charged, for a set period. In other words, whilst your monthly payments can be affected by movements in the mortgage rate, you will know the maximum rate that could be charged during the set period and be protected from rates higher than the maximum limit.
(A collared rate is a specified minimum rate; hence a capped and collared mortgage will be a variable rate mortgage, where the rate will be limited between a known minimum and maximum).
Discounted Rate mortgages
This is a variable rate mortgage, which allows a known reduction in the mortgage rate charged for a set term.
This differs from a deferred rate mortgage, where instead of allowing a discount in the rate charged, a reduced monthly payment is allowed, with the shortfall being added to the mortgage debt.
At the end of any fixed, capped or discounted rate period, your mortgage normally reverts to the lender’s standard variable rate. This may be higher than the rate you have been paying. In some cases, the lender may offer you an alternative rate. Your mortgage offer will confirm the details.
Some fixed, capped and discounted rate mortgages can be continued if you move house during the term of the offer rate. This is known as a portable mortgage. This might be one of those important factors
How to pay a mortgage off early
We can give you the information and guidance as how you can best minimise the cost of borrowing over the long term and become mortgage free quicker than you might ever think is possible. The cost of interest charges on mortgages over the years is very high, (just look at your mortgage illustration).
Typically you could pay £400,000 for a house that you borrowed £200,000 for. That is down to one thing, the cost of the interest that you pay on the money that you borrow. And remember, you are paying out of income that you already paid taxes on so it takes an even bigger chunk of your earnings over the years.
You can massively reduce this cost with a combination of the right mortgage, regular periodic reviews and a debt elimination strategy and get that mortgage paid off well within the original term.
It's possible to save literally thousands of £s and minimise the damage so to speak. The trick is to combine mortgage reviews with a very specific and intentional debt elimination strategy, which will achieve this result.
There's no charge for sharing this information with you, it's an added benefit if it's of interest to you when when I provide mortgage advice. It's just another facet in the processes if you want it.
What's the application process?
You will have read your personalised illustration (called a Key Facts Document), which shows the mortgage recommended and all of the details, costs etc. that we'd have discussed.
When you're happy to proceed we can apply for the mortgage. Here again, technology comes into its own. More and more lenders are equipped to complete a decision in principle and on to full mortgage application online.
You can know (in some cases within a minute), whether the lender approves the loan you want (subject to valuation etc.) and that you aren't wasting your time by proceeding.
As a direct result of the so called "credit crunch" lenders are currently withdrawing products with very little notice. There has perhaps never been a time when it was so important to select the best mortgage for you and act decisively.
Rest assured that your application is treated with the utmost urgency so you won't loose out. I've even driven to a lender's branch office to ensure that the preferential terms were kept when one lender did this in the past.
Of course there are still some lenders that require a paper application form but they are getting fewer as they realise the time and cost saving capacity of online systems.
By the time you are ready to apply for your mortgage, you'll need to appoint a solicitor to act for you. If you want to see how much see the conveyancing (legal work) will cost you so you can please click on the Conveyancing tab above or here for an instant quotation for your legal fees. This will help you save yet more time and money and if you have any questions, just ask.
Your mortgage offer
Until your mortgage is offered, you are not in a position to exchange contracts if you're buying a new home, so it's crucial to pass this hurdle as fast a possible.
After your mortgage has been offered and your completion date is in sight, there's a lot for you to organise like packing and preparing to move in etc.
I can help make sure that the necessary insurance that you need are in place and ready for the completion date leaving you with one less thing to think about.
Finally, you will complete and your dream will have become reality.
Your home may be repossessed if you do not keep up repayments on your mortgage.
As an Independent Mortgage Broker you can choose how we are paid: we can be paid by commission or a fee (usually 0.3%) of the loan amount.