Choosing the right deal
2 minute read
For most of us, taking out a mortgage represents the single largest financial commitment of our lifetime. Choosing the right mortgage deal is therefore vital, as the decisions you make
about which lender to use and what type of mortgage to take will have a long-term impact on your household finances.
The number one rule for choosing the right mortgage deal is to look at all the costs involved, as well as the terms of the deal. A mortgage with a fantastically low headline rate may not be quite so attractive if it has a large arrangement fee attached.
Think About the Mortgage Term
Some mortgages tie you in for the term of the product, and charge a hefty Early Repayment Charge (ERC) if you want to move to a better deal any sooner. Think carefully about your medium and long-term mortgage plans and whether you are happy to be tied in, even if a better mortgage deal later becomes available with another lender. Also consider whether you are likely to want to make lump sum part repayments to your mortgage within the next few years, as some mortgages may also apply a proportional ERC for paying off part of the mortgage.
If your household budget has only limited disposable income each month, you may want to opt for a fixed rate mortgage, which provides the stability of knowing that your payments won’t increase for the agreed product term. Alternatively, if you have some flexibility in your budget, a capped or tracker mortgage will allow for rate increases, but also the possibility that your payments might reduce if interest rates should drop.