From introductory interest rates to mortgage fees, there are a number of factors to take into account before choosing the right mortgage deal for you.
Many home buyers consider monthly mortgage costs as the most important aspect of the deal, overlooking the fact that cheaper monthly repayments can in reality, lead to a more expensive deal over all.
Here are a few things to consider before selecting the right mortgage for you.
Interest rates
The interest rate you choose will largely dictate how much your mortgage will cost you overall.
If you’re keen to protect yourself from financial uncertainty and fluctuating mortgage costs, locking yourself into a fixed rate mortgage deal can offer you a level of protection. Many lenders offer a choice of fixed rate period, often ranging from two years to 10 years.
When your fixed rate period is up, your mortgage may revert onto the lender’s standard variable rate (SVR) and if this is higher than your initial rate, your repayments are likely to rise.
Length of mortgage term
One of the most common reasons why a mortgage may be expensive despite having modest repayments is the length of the mortgage term. For example, let’s imagine you take out a mortgage of £100,000 at an interest rate of 3.92%. If you spread this over 25 years, you’ll repay £157,029 in total. If, however, you spread this over 35 years, you’ll repay £183,955.
Mortgages spread out over a longer period of time tend to accrue more interest, so if you’re looking to reduce the true cost of your mortgage, opting for as short a mortgage term as possible could save you thousands of pounds.
Arrangement fees
According to data from Moneyfacts, 40% of first time buyer mortgages now come without any arrangement fees, a 25% increase from the same period the year before.
However, although the number of fee-free first time buyer mortgages are on the rise, 61% of mortgages on the market do come with a fee that must be taken into account. This can make it difficult to work out which is the cheapest deal.
Cashback
Some mortgage deals include cashback, meaning you’ll get a sum of money on completion of the deal. Be sure to take this into account when calculating the true cost of your mortgage, but don’t automatically rule out alternatives. Although a cashback-free mortgage deal won’t give you that initial cash boost, it could work out much cheaper overall if there are other rewarding factors involved.
Mortgage broker fees
Although mortgage broker fees aren’t part of the mortgage deal itself, it’s worth taking these into account before choosing the deal for you
If you’ve found a suitable deal on a price comparison website or your current bank has offered to lend you the money you need for your home, you may be tempted to skip using a mortgage broker altogether. However, using a mortgage broker can actually work out much more cost effective in the long term, particularly if you use a broker who compares dozens of deals from across the mortgage market.
A good mortgage broker will work out the true cost of each mortgage deal on your behalf, doing all the sums for you to work out which products are the most affordable. They’ll also take your personal finances into account, looking at everything from your income to your credit rating to ensure the lender will approve your application.
If you’d like to find out how TaylorMade can help you work out the true cost of each mortgage deal, please get in touch with our team today.
