With such a huge range of mortgage products available, it can be confusing and stressful trying to work out which one best fits your situation and which will work for you in the long run. The most important thing to remember is that no mortgage ties you in forever and that if you are not happy with your mortgage after a certain period there is always the option to switch to one that better fits your needs.
However, you will want to choose a good one to begin with and this is where a comparison website is your best friend. Comparison websites list hundreds of lenders, deals and discounts, and allow you to fill in your own personal situation to bring up the ones best suited to you. It can still get a bit confusing at times if you do not know much about the mortgage types available to you, so here is a run down of some of the things you might see on your comparison website read-out.
Fixed Rate – a fixed rate mortgage basically locks the interest rate on your mortgage for a certain period of time. This means that your monthly repayment will not change whatever happens with the banks own interest rate or the Bank of England base rate. You are guaranteed a monthly repayment for a few years that you can budget for. The only problem with fixed rate mortgages is that they often have slightly higher rates than tracker or SVR mortgages, and once your fixed period is up you will be moved onto the bank’s variable rate which could bring your repayments up.
SVR – SVR stands for Standard Variable Rate and means that the interest rate on your mortgage will change as the bank’s personal interest rate does. This may mean it rises but also may mean it gets lower, giving you lower monthly repayments. SVRs usually only rise when the Bank of England base rate does, but in recent times many high street lenders have decided to raise their rates anyway, meaning those already on SVRs must be prepared for a rise in their monthly repayments.
Tracker – Tracker mortgages only rise in interest when the Bank of England rate does, meaning for the past few years these have been the best option, as the base rate has been stuck on an all time low of 0.5% and still does not seem likely to move any time soon. However, with a tracker mortgage you must bear in mind that over a period of 25 years you will probably see some movement in the base rate and at the moment it is unlikely to get lower, so you may see a rise in your interest after a while.
Other things to look out for on comparison websites are options such as buy-to-let and offset mortgages. Buy to let are really only for investors who want to pay their mortgage off with rent from tenants. if you are looking at this kind of mortgage you will already need somewhere to live, but they can be a great investment with very little financial risk involved. Offset mortgages tie in your savings or current account balance with your mortgage, allowing for a more flexible plan with which you can add more money to your savings to bring your repayments down, or take away from them for a cash boost and just take a slightly larger hit on interest rates on your mortgage.
The best way to decide on the perfect mortgage for you is to work out which kind you are most comfortable with, then take advantage of any deals or discounts which relate directly to your situation – for example if you are a first time buyer you may be able to get a discount for a period of time.
After this, choose a bank you are familiar and comfortable with, and if you get really stuck speak to a financial advisor.