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David Hollingworth says an advisor can help you find the right mortgage deal for you
Fixed or variable?
‘The first thing you need to do is determine what type of mortgage deal will offer the features that will suit your situation.
“Think initially about whether you prioritize knowing what you will pay over a certain period of time or whether you are happy for payments to fluctuate, perhaps in the hope that interest rates will fall,” David Hollingworth said.
Of course, choosing a fixed rate mortgage means that if the Bank of England base rate falls, you won’t benefit from a fall in rates.
On the other hand, in uncertain times, a fixed rate can help ensure you can pay each month.
He said: ‘If security is important, a fixed rate is probably the right option for you.
‘This will mean you know what rate you will pay over a specific period and eliminate any concerns about any changes to the base rate over that period.
“If you are hoping that rates will fall and payments will fall as a result, then a tracker or discount deal could be an option, but be sure to consider how well you would fare if rates didn’t fall or even rose further.” .
Two years or five years?
Choosing between a two-year contract and a five-year contract will largely depend on your situation, both financially and in life.
A two-mortgage might be ideal if you think you might move house, but switching between short mortgages means you’ll end up paying a lot more in fees over time.
‘Once you know what type of rate you want, you can think about the negotiation period that suits you best. Many agreements will bind the borrower to early repayment charges (ERC) during the agreement period.
“So, if there are potential changes in the future and you may want the ability to compare prices in the market, you may prefer to stay for the relevant period,” Hollingworth said.
‘For example, if you’re moving in a couple of years, you might prefer to accept a two-year contract rather than being locked in for five years or more.
“You can take most offers to a new property, but there’s no guarantee the lender will be able to offer any additional loans or at what rate, so having the flexibility to shop around may be preferable.”
The fees involved
When looking for a mortgage, keep in mind that you will have to pay a processing fee to the mortgage provider.
‘This is something you would need to include as part of the total cost of the mortgage deal and could cost you over £1,000.
Don’t get caught in a mortgage deal with low rates but sky-high fees. Some lenders will do this to make their offer more attractive but will charge you fees over £2000.
Is a broker worth it?
Unless you’re well-versed in the world of mortgages, navigating the plethora of deals available can be a daunting prospect. Finding a broker can help you not only find a deal that suits your needs, but also ensure you understand the jargon and reduce the stress you face.
“Getting advice will help you on both counts, as an advisor will not only be able to help you understand the best type of product for your circumstances, but also help you identify the best one available,” Hollingworth said.
“That will include taking into account the rate offered but also taking into account any associated fees that may apply.”
Some of the lower rates may come with high fees, which could mean they are not the best value for money.
They will also be able to keep you informed about possible withdrawal deadlines or find the next best alternative if a deal closes. That should give you a better chance of being able to lock in a rate before it disappears, as well as ensuring you get the best value.
This is Money, L&C’s mortgage advice partner who can help you understand how much you can borrow and find the right deal for you; offers free advice.
> Find the right mortgage for you with This is Money partner L&C