Deciding Factors for Mortgaging
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The UK mortgage market is fiercely competitive due to plenty of worthy companies offering value for money deals to the benefit of borrowers. However, this competition comes with strings attached. Do not forget that these players are here more to earn profit than to think about your interest. Be wary of hidden costs associated with your loan, packaged within attractive schemes. No matter therefore, how convenient it may seem, you must thoroughly analyze a mortgage plan prior to materializing it. We are providing here a brief checklist of the aspects you should consider when planning for a mortgage.
compare the UKs most competitive mortgage deals
Mortgage type
Borrowers may find it perplexing to single out a mortgage plan from a broad spectrum of schemes. To begin with, you may go ahead with eliminating those you do not find worth considering. Mostly it’s fixed rate and discounted rate mortgages that prevail. Fixed rate mortgages, as the name suggests, commands an ascertained rate of interest on principal during the agreed term. To understand discounted variable rate mortgages, let us first understand standard variable rate (SVR).
Standard variable rate (SVR) is the interest rate directed by the Bank of England’s base lending rate and may fluctuate over a period. As a result, under an SVR driven mortgage plan, a borrower pays more interest when the rates are high, while is levied lower interest as the rates decline.
SVR guides discounted rate mortgage’s interest rates and owing to any fluctuation in SVR, the lenders further curtail the applicable interest rate on the principal for the agreed term. Note that beyond the agreed term of fixed or discounted rate, which is usually two years, your principal is thereafter charged with prevailing SVR.
Mortgage term
Usually mortgage term may range from a few months to five years. Fixed rate and discounted variable rate mortgages can actually fetch you one of the best bargains for small mortgage terms of around two years. Beyond the agreed time however, the principal under these two schemes is charged with SVR of interest, and if you elect to go for remortgaging, you may have to pay extended redemption penalty levied at the prevailing SVR. This may cost you a substantial sum of money.
If you elect to go for a fixed rate mortgage for long term, usually 10-15 years or more, then the deal seems great if the interest rates climb up. However, you are deprived of monetary benefits if the rates decline.
Remortgaging may not be an option as again the redemption penalty will offset the interest rate benefits. The optimal mortgage term is believed to be 2-5 years as you are able to strike the best of balance between interest rate variations and your need.
Lenders
Last but certainly not the least; pick a lender with good reputation and straight forward approach, offering standard interest rates. They explain the charges to you in clear terms and not like most other lenders, all set to dupe the customer with attractive wrapping and sad content. You must beware of very unbelievable to sound mortgage plans as actually they may not be worth relying on. Such lenders lure with their low interest rates which escalate soon after short term. They also charge hefty fees and penalties under numerous heads, thereby forcing you to stick with them.
compare the UKs most competitive mortgage deals
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