Finding the right mortgage is like finding the perfect match. Certain attributes or traits of a potential mate or mortgage make compatibility more likely.
So a financial comparison website looks a lot like an Internet dating site. You can compare mortgages on a range of things: rate, fees, term, hobby, favorite tree, and attitudes toward particular issues (like the Great Reform Act of 1832).
But this mortgage dating game puzzles me. All of this assumes I know what I’m looking for – what I can’t do. This partly explains my unfortunate relationship (which lasted 24 months) with Magda, a 2 year fixed rate mortgage, who while enjoying the hike, was completely socially inept and very unreasonable (she would only travel by Penny Farthing). and insisted on wearing a monocle).
What I really needed, before looking for a mortgage, was to figure out what would be compatible with me. Probably the biggest advice I could give you is to make sure you shop around. I stuck with Magda because she was the match my bank offered me, but choosing from a limited pool is like having to select your partner from a small family group, like The Nolans or The Chuckle Brothers. While you might just find a perfect partner from your bank or building society, surely it is best to have seen everything on offer as well? This simple exercise could save you hundreds if not thousands of pounds a year in mortgage payments.
But before you jump into the labyrinthine world of mortgage dating, here’s a rundown of the key things you need to keep in mind:
- Introductory Rates. Probably the single most important consideration when selecting a mortgage. The dating equivalent is as important as a partner’s opinion of the Second Great Reform Act of 1867. With mortgages there are two types of rate: fixed or variable. Put simply fixed won’t change, but variable might. Fixed rates give you more security (as you know what you’ll be paying for a set period) but tend to have higher fees.
What are the risks?
The risk with a fixed rate is that the interest rates go down but your rate doesn’t, which means you have to shell out the same every month while those with variable rates get lower payments.
The risk with a variable rate is that if the rates go up, you will be paying a lot more for your mortgage. For example, if your rate goes from 4.00% to 5.00%, it could cost you up to an additional £ 83 per month on a mortgage balance of £ 100,000!
I remember waking up one day and finding Magda much less attractive. The rates had gone down drastically, you see, and she just didn’t look alike. My friends at varying prices were throwing parties – some even went on vacation. I stayed at home. Slowly, barely noticeably, I became more and more resentful of this attractive 2-year fixed rate that had seemed such a good idea at the time, but which now, in the cold light of day, looked like a completely different mortgage.
But there is no right or wrong choice. While I chose Magda, my friend chose Tomasz, another 2 year old fix and was very happy (these names are quite unusual for mortgages – the majority are actually called Tarquin or Ursula).
- Term. The next thing you need to think about is how long you would like the introductory deal to be. For a fixed rate this is important as it is usually the case that you are “tied in” to your mortgage for the introductory period, meaning you may have to pay an early repayment charge if you want to switch deals or repay the balance in full. There may be a tie in for a variable rate mortgage as well though so check Section 10 of any Key Facts Illustration you are given to find out what, if any, Early Repayment Charges are payable. As with rate there is no right or wrong choice. You may want to fix your rate for three years so you know what you are paying while you are supporting your child through university, or you might be planning to repay your mortgage at the end of five years when you sell some shares. The point is: have a plan. Don’t be constantly remortgaging every two years just because that’s what you think everyone else does. This is your mortgage, select it based on your requirements.
- Set up costs. How much it costs to set up your mortgage can be a deciding factor in the deal you end up choosing, particularly if you are remortgaging. There are usually fees to pay for arranging the mortgage, a valuation fee and legal fees (there may be other additional costs such as Stamp Duty if you are purchasing a house). If you want to try to minimise the payment of any upfront fees, there are deals that offer this (although be prepared for this to be at the expense of a higher rate).
Flexibility. I wish I had chosen my mortgage based on its flexibility. Flexible mortgages can allow you to:
Overpay – where you can pay on top of your monthly payment, either as a regular payment or as a lump sum. Be careful though, many mortgages will put a cap on the amount you can overpay each year.
Refer to Section 11 of any Key Facts illustration for restrictions on the mortgage being considered.
Underpayment – where you can pay less than your monthly payment for a period. This normally depends on whether you have already accumulated enough overpayments and will be subject to your lender’s approval.
Payment Holidays – where you can interrupt your monthly payment for a period. As with underpayments, this is usually subject to prior overpayments and subject to the lender’s prior approval. Remember that interest will continue to be charged if you take a payment holiday which will increase the amount you owe.
Borrow – if you decide to overpay, you may be able to “borrow” the money you overpaid. However, there will normally be a minimum amount to be withdrawn and you will need to get approval from your lender.
What I really didn’t like about Magda was that she was so inflexible. She didn’t want to let me pay too much and she didn’t like me going out with my friends, unless they were riding bicycles built before 1890 or they totally disagreed with the provisions of the second Great Reform Act.
- Offset Mortgages. Mortgages aren’t the only financial products that you can date online. No you can also date Savings accounts. Sometimes a mortgage may also be in a relationship with a savings account. When this happens you get an Offset mortgage. Offset mortgages are great. They allow you to put your savings into an account and reduce the interest charged on your mortgage. This usually saves you a packet as mortgage rates tend to be a lot higher than what you would have earned on your savings. So this type of mortgage might be is worth considering if you have a large pot of savings that aren’t working very hard for you.
Tout cela étant dit, toute relation est fondée sur un compromis. Ne vous inquiétez pas si votre prêt hypothécaire ne contient pas tout ce que vous voulez, assurez-vous simplement qu’il coche suffisamment de cases pour répondre à vos besoins. Malheureusement, Magda et moi avions des divergences irréconciliables et nous nous sommes maintenant séparés. Je n’ai pas beaucoup de contact avec mon prêt hypothécaire et, même si elle appelle encore à l’occasion, j’ai tendance à ne pas répondre. Je suis maintenant très content d’Ursula, un tracker à vie.
Toujours dans le doute? Utilisez un entremetteur hypothécaire.
Vous ne l’avez peut-être jamais envisagé de cette façon, mais les conseillers financiers indépendants et les courtiers en hypothèques sont la Cilla Black du monde hypothécaire. Ils prendront en compte vos besoins et vous aideront à comprendre vos besoins financiers, puis compareront les meilleures hypothèques pour vous. Ils posent des questions à une lora lora, mais peuvent être très utiles si vous avez du mal à déterminer quelle hypothèque serait votre partenaire idéal.
Moneyfacts.co.uk est le premier fournisseur indépendant d’informations financières au Royaume-Uni. Depuis 1988, nous fournissons des informations impartiales aux professionnels des services financiers, ce qui a aidé des milliers de clients à obtenir la meilleure offre sur leurs prêts hypothécaires, comptes d’épargne, cartes de crédit, prêts et autres produits de finances personnelles.
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