Best Mortgage Rates – Getting the Best Mortgage for You
Finding the best mortgage rates and navigating the mortgage minefield can be a complex process as there are so many mortgage products nowadays, each with their own benefits, it’s difficult to know which is going to offer you the best terms for your property investment.
To help guide you through the mire, we’ve created a handy list of considerations that will enable you identify the right mortgage package for you.
Understanding what type of mortgage you need to get the best mortgage rates
The first question that needs to be answered is – What is the purpose of the mortgage?
There are many different reasons for applying for a mortgage these days, rather than just securing somewhere for you and your family to live. For example:
Are you looking to upgrade a property and sell it on in the near future?
If you are intending to buy the property, invest your own cash to improve its appeal and sell it on at a higher price, then you need to understand how your own cashflow will be implicated on such a short term loan.
Ensuring you have contingency available to remedy any unforeseen challenges that may arise during upgrade work must be a consideration – whether its repairing a roof, overcoming damp or mending a collapsed drain. Such issues do occur quite regularly so its imperative to ensure you have funds available. For this reason, it may be worth considering a mortgage option that allows you to be flexible with your repayments, freeing up cash should it be required.
Are you looking to release capital from your existing property?
Remortgaging a property could be done for any number of reasons, however the most important consideration is to find out whether the mortgage product you want to apply for is actually available for remortgaging – this may seem obvious, but not all packages are.
In addition, find out if there are there any extended early repayment charges. If you go for a fixed rate or term, such as three years fixed rate or a discount for two years, then you’ll need to find out what happens afterwards. Many accept that they will be penalised for coming out of the deal early in the initial stages, and a lot of lenders will then continue to have a repayment fee later in the term if you back out. Therefore, you should definitely avoid such extended offers.
Are you buying the property as a longer term investment and let it out?
Buy-To-Let (or BTL) mortgages are often provided at a higher rate than a standard mortgage options. When you are buying a property to let out, the main consideration should be whether you are able to support that mortgage repayment in the event that the property is untenanted. Many prospective landlords view buy-to-let investments as a simple opportunity to create long-term wealth which can be redeemed upon retirement. However, what most people fail to consider is the amount of legislation, maintenance and other unanticipated fees that can reduce the value of the investment and also take up a lot of your own time trying to resolve.
Any income you receive over and above the mortgage interest repayment will need to be declared as it will be liable to Income Tax. In addition, when you do come to cash in on your investment, please consider that it is likely to be subject to Capital Gains Tax (if it exceeds the threshold set by the Government at the time).
Have you decided whether you want a repayment or interest-only mortgage?
If you pick interest-only, you NEED a separate plan to pay off your debt, as your payments only cover the cost of the interest. A repayment mortgage, while it costs more each month, pays off the original debt too.
Unless you have a compelling reason, repayment is the way forward. It’s also the one you’re most likely to get as some lenders just won’t offer interest-only deals. Those that do will want evidence of a credible repayment plan and might limit the amount you can borrow. The most important thing to remember with a fixed rate mortgage is that you have the confidence of knowing precisely what your mortgage repayments will be for the entire term of your mortgage.
There are many other things to bear in mind when applying for a mortgage – for example, make sure are fully aware of all of the fees that are going to be applied throughout the process – often speaking to a Mortgage Broker, such as Direct Mortgages, is the better option as they are able to guide you through this process with ease.
We hope this has helped you to find the best mortgage rates for you, if you would like to know how much you are able to borrow, please feel free to try our simple mortgage calculator – available by clicking here!