Choosing The Best Mortgage Interest Rate

Choosing The Best Mortgage Interest Rate



Choosing the​ best mortgage interest rate
One of​ the​ most important aspects of​ buying a​ property is​ the​ mortgage interest rate that you​ can obtain .​
After all your looking to​ borrow the​ amount required for your property for the​ lowest possible cost.
Standard variable rate is​ the​ typical rate of​ interest that lenders use and it​ is​ generally the​ most expensive option for the​ borrower .​
the​ standard variable rate is​ the​ rate of​ interest decided by the​ lender which maybe loosely connected to​ the​ Bank of​ England base rate by a​ margin normally around 2%.
If you​ are on​ a​ standard variable rate then you​ may notice that some lenders like to​ involve any rate increases with effect straight away .​
At any rate the​ standard variable rate is​ not the​ cheapest option available (based on​ circumstance) .​
As a​ independent broker we can help you​ take advantage of​ any cut-price offers from other lenders.
A fixed rate is​ exactly as​ its called,​ the​ rate of​ interest is​ fixed over a​ certain period of​ time,​ generally between 1-5 years .​
Fixed rate mortgages are generally easier to​ manage since you’ll know how much is​ needed for the​ monthly repayments on​ your mortgage .​
The fixed rate mortgage is​ ideal for people who maybe under financial stress and need to​ know where they stand from cheque to​ pay cheque .​
Fixed rate mortgages are also suitable if​ interest are set to​ rise in​ the​ early years of​ a​ mortgage .​
Be aware that mortgage providers are usually one step ahead to​ adjust fixed rates accordingly .​
a​ Fixed rate mortgage means you​ could end up stuck with paying more then others if​ the​ interest rates fall below the​ figure you’ve adjusted yours to.
Discount rates are a​ percentage of​ the​ lenders variable rate,​ so your repayments will rise and fall in​ accordance with the​ lenders normal rate but you​ will be paying at​ a​ reduced rate over an​ according time period .​
This is​ ideal for first time buyers as​ a​ discounted mortgage can give you​ a​ few years of​ breathing space .​
a​ 1 -2% discount is​ very good if​ there is​ no lock in​ period afterwards,​ with the​ benefits of​ this come the​ ability to​ remortgage with another lender when the​ discount rate period draws to​ an​ end .​
Unfortunately you​ may often find you​ are locked in​ for another couple of​ years on​ the​ variable rate so you​ will not be able to​ get out of​ this sort of​ deal unless you​ are prepared to​ face huge redemption penalties .​
Discount mortgages offer good value for money - but only if​ there is​ no lock-in period once the​ discount has come to​ an​ end.
A capped rate will put a​ barrier to​ your interest rate you​ will pay over a​ certain period of​ time .​
If the​ lenders variable rate exceeds the​ capped rate then it​ is​ here you​ will benefit,​ but if​ the​ interest rate falls below the​ capped rate then you​ will paying the​ same as​ many others.
Capped rates will tie you​ into a​ mortgage for a​ certain period of​ time,​ usually between 1 and 5 years although recently there has been an​ introduction of​ capped mortgages for 25 year periods.
Capped rates give you​ a​ mix of​ advantages of​ the​ fixed rates and variable rates,​ again something is​ expected in​ return for this,​ the​ capped rate is​ likely to​ be higher than any fixed rate you​ can get .​
Like fixed rates the​ capped rate will make financial sense for those who are financially stricken.
Tracker rates tend to​ follow the​ Bank of​ Englands interest rate with a​ margin either above or​ below the​ rate,​ this is​ decided by the​ lender.
How will the​ interest be charged? Ignoring the​ type of​ interest rate you​ decide to​ go with one vital question to​ ask is​ how frequently is​ the​ interested calculated .​
If you​ decide to​ go for a​ mortgage where the​ interest is​ calculated daily then you​ will find yourself paying less interest over a​ period of​ time because every payment will reduce the​ amount you​ owe .​
Current account and flexible mortgages charge interest day by day .​
If interest is​ calculated monthly you​ could end up paying more and you​ can end up waiting a​ month after a​ payment is​ made before the​ interest is​ recalculated .​
But some lenders have their foot in​ the​ door by calculating the​ interest payable on​ the​ amount due at​ the​ start of​ the​ year and this could make a​ significant difference to​ the​ amount of​ capital reduction over 12 months .​
It also means that if​ you​ make an​ additional payment to​ reduce your mortgage it​ could be up to​ a​ year before this reduces the​ amount of​ interest you​ are charged.
You can compare mortgages by looking at​ the​ amount you​ need to​ pay every month .​
Don’t be fooled by latest headline rates as​ they can be misleading as​ we know different companies charge different interest rates in​ different ways .​
The ideal target is​ a​ competitive interest rate that carries no redemption penalties so that it​ is​ cheaper to​ move your mortgage elsewhere if​ more attractive mortgages become available.
By law mortgage providers have to​ provide an​ Annual Percentage Rate (APR) for their products .​
It illustrates the​ true underlying interest rate,​ including all the​ charges,​ over the​ entire term of​ the​ loan .​
This means it​ adjusts for things such as​ annually charged interest .​
Comparing the​ APR of​ one loan against another can also help you​ get a​ better feel for which is​ the​ most competitive.




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