Choosing the right mortgage for you.
One you know how much and the deposit amount, you will need to pick a mortgage. Here’s a checklist to assist and help you to decide which mortgage features are most important to you.
Are you looking at a repayment or interest only mortgage?
You can choose between paying off the amount you borrow and the interest, or just paying back the interest.
Keep in mind with interest only you will need to show the lender that you have a strategy that will pay off the mortgage when it’s due - lenders don’t always offer an interest only mortgage.
Are you looking for fixed or variable monthly payments?
You may want security that your monthly payments will remain the same. If you can find a reasonable, affordable deal consider a fixed rate mortgage. If you go with a variable rate mortgage the interest rates can change at any time, it’s an idea to keep some saving aside so you can afford an increase in your monthly payments.
Some mortgages come with a capped rate where the rates won’t rise past a certain level.
Are you happy to pay a large fee and get a lower rate?
If you pay a large upfront arrangement fee, you can probably get a lower interest rate. If you are looking at a free-free mortgage, you will more than likely pay a higher rate.
Do you want to add some or all of your fee to your mortgage?
If you are unable to pay the fees, you might be able to add them to your mortgage. Keep in mind, you will pay interest on the extra debt for years to come.
Do you want to have payment flexibility?
Some mortgages allow you to overpay, underpay and even take a short break where you don’t pay your mortgage at all. Whether these options are available to you will depend on the terms and conditions of your mortgage, as well as your financial situation.
Do you want to be able to move lender?
Being able to re-mortgage to a better product can save you hundreds and sometimes thousands of pounds. Most lenders will charge a leaving fee. If you’re on a fixed-rate deal, early repayments fees can be substantial. You might be able to find a mortgage with low or no exit fees.
Make sure you do your homework, if you don’t understand something speak to your lender or ask your mortgage broker to help you.
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