The definitive guide to estate agency
Getting the right mortgage can seem a mammoth task so it pays to know which types of mortgage are available before commencing your search.
When considering which type of mortgage is right for you there are essentially two routes to go down – fixed rate or variable rate.
Fixed Rate Mortgage
A fixed rate mortgage tends to be the more popular choice, especially for new homeowners as it provides a greater sense of security. With a fixed rate mortgage your payments are fixed for an agreed duration, anything from two to ten years, allowing you to plan your finances more accurately. However once this time period expires you default back to your lenders standard variable rate so make sure this doesn’t catch you off guard.
Variable Rate Mortgage
A variable rate mortgage is liable to change in line with a change in interest rates and is usually available at a tracker or discount rate or at a standard variable rate.
A tracker mortgage coincides with the base rate set by the Bank of England and will change in accordance with any change in interest rates usually just above the base rate set. With a standard variable mortgage your rates are decided by your lender and will usually fluctuate depending on the current rates available on the market. Although still influenced by the base rate, these can vary substantially from lender to lender and aren’t as common as they once were.
If you opt for a discount rate mortgage your rates can change independently in comparison to the base rate but more often than not still reflect that of a lenders standard variable rate.
Early repayment charges
Believe it or not a mortgage lender can charge you an additional fee if you choose to make early repayments. This can even stretch beyond the initial mortgage period agreed and although more uncommon today, opting for a ‘no overhang’ option can help avoid this unwelcome surprise. These charges are more common if you wish to make an early repayment during the agreed length of your fixed term mortgage but again make sure you know what you’re agreeing to.
A mortgage application can take anywhere between two weeks and a month but again preparation is key for a speedy process, having all your documentation in order prior to your application will help things along.
As with all the documentation involved make sure you read everything your lender sends you and file it away safely. This keeps you 100% in the loop and can avoid those nasty, unexpected charges. Yes it might seem like a lot to read but considering it is one of the biggest investments you are likely to make, it makes sense to know the ins and outs.
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