There are many things to consider when you apply for a mortgage starting with how you feel about the lender. Are you not bothered who lends you the money as long as the rate is competitive, or would you rather have a lender that scores well on the ethics front. If the latter applies then although some banks not effected by misselling and excesses before the financial crisis would score well, generally this space is occupied by the building societies. These lenders are mutuals with simpler structures than the banks and they often score better in customer satisfaction surveys.
Having decided upon your lender the next hurdle to overcome is how long you would like to be tied in for; at this point it would be useful to ask yourselves a few questions. The most important one would be that if interest rates went up how would you cope? If the answer is the rate would need to go up an awful lot before I would fall in to arrears then I believe the offer options are definitely open to you. If you feel that only small rises would cause you considerable difficulties then a longer fix could be the answer, and I have to say that even though pundits try to predict rate movements there is no certainty in this area. The last thing you would want to happen is to listen to the media who are predicting low rates forever, and then get caught out by rising rates that could ultimately lead to repossession.
Once you have decided about whether you are going for a fixed or variable rate and how long for, almost simultaneously you will be looking at the term of the mortgage and perhaps adjusting to reflect affordability. Often with younger borrowers there is plenty of scope with mortgage terms available for up to 40 years to keep payments down, but as we get older unfortunately this is not the case and the mortgage term shrinks.
As well as looking at the term of the deal other things to take into account are the fees you pay to get the deal. The rate may look good, but sometimes the booking fee the lender charges outweighs the market leading rate and you could be better off going for a higher rate and lower fee. Also when examining deals in detail, it is worth looking at your deal to see that if you decided to exit the deal what the penalties would be, with some lenders charging a sliding fee and some a fixed for the whole of the tie in, making exiting very expensive. Even when you reach the end of your tie in, try and visualise, as best as you can, what your circumstances would be. If you think you may have become self employed, or say as a couple earning less it may not be possible, due to income, to remortgage. So it is worth bearing this in mind when choosing your lender to ensure for example that if the worst comes to the worst you have a competitive variable rate deal. Finally, if you are borrowing a high loan to value , and for example buying a property that needs refurbishing and you have the money to do this it is possible that once the work is done that say after a two year deal you may be able to access the best rates on the market. This may be because you have increased the value for the property significantly, although only having reduced the balance by a little. Although it must be remembered that this is only worth it if you are willing to take a chance on the interest rates remaining low, and accept you could be caught out if interest rates rise.
As you can see making an effort to get the right mortgage raises many questions that need to be answered as many scenarios appear. It is vital in an effort to answer the question that you choose to get independent chartered advice to help you make a fully informed choice.
Kieron Bassett DipPFS, Cert SMP
1st February 2016
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