When considering mortgage alternatives, most people will simply look at the interest rate at the start of the loan and make a decision based on the lowest interest rate. This is understandable - but a big mistake.

If all else was equal, this would be the obvious solution. But if there is one thing in the mortgage market on which we can be certain, it’s that all things are almost never equal! So what do we need to look out for and why? Here are a few ideas;

  1. The Mortgage Term. The period over which you repay your mortgage will have a tremendous effect on the cost of the mortgage over its lifetime. It will also affect the monthly repayments in the opposite manner. For example, borrowing over 360 months (30 years) will cost you more than the same mortgage taken over 300 months (25 years) but the monthly repayments on the longer mortgage will be less.
  2. Penalty Terms. If you are tied into a mortgage or early redemption (paying off the mortgage) attracts a penalty fee and administrative costs, you need to allow for this when considering your options.
  3. Capped versus Variable vs Fixed. We’ve written on the difference between these different terms before. But when considering mortgage options an understanding of these definitions and their impact on your monthly budget is critical.
  4. Fees - lenders charge a variety of fees and borrowers must look at the “total to pay” including fees to make a fair comparison.
  5. The Devil is in The Detail! Most mortgages will have fairly standard terms relating to things like Loan to Value (LTV) but few people realise that when house prices fall, lenders might insist that the borrower inject more cash into the loan (reducing debt and rebalancing the LTV). Knowing whether these terms apply can be important.
  6. The Right tool for the right Job. A mortgage to an owner occupier will be allowable to someone buying a house to let. The risk profile of each loan is different and many loans aimed at owner occupiers specifically exclude ‘buy to let’ or short or long term lettings (or even voids where the property is left empty).

For these and many other reasons, it’s important to have a full understanding of all the relevant terms included in each mortgage offer if you are going to be able to properly consider which mortgage is best for you. At Mortgage Required we know this and we have the tools and experience to guide you through this potential minefield unscathed...

Download our Free First Time Buyers Guide

Recent posts

Lloyds Banking Group has jumped on the bandwagon to boost lending for first-time buyers as they allocate an additional £4 billion to help first-time buyers on to the property ladder.

As the Loan to Income (LTI) cap has been increased to 5.5 times income, applicants who fit the First Time Buyer Boost criteria could borrow up to 22% more. 

The government is introducing mortgage reforms to boost homeownership, stimulate economic growth, and make the housing market more accessible, especially for first-time buyers.

Chancellor Rachel Reeves has announced the most significant mortgage reforms in over a decade—great news for those dreaming of homeownership.

Nationwide ease their ‘Helping Hand’ mortgage designed to help first-time buyers get onto the property ladder by allowing them to borrow up to six times their income.

 

Keeping the kids entertained over the six-week summer holidays isn’t always easy, especially with the cost-of-living making it even more difficult. Below is a list of fun, inexpensive ideas to do over the break

The Financial Conduct Authority (FCA) has published a discussion paper about the future of the mortgage market in a bid to improve access for first -time buyers, self-employed, and those borrowing in retirement.

Ever wondered where the most reasonably-priced towns for families to buy are? Property company, Zoopla has identified the top 10 towns for families to live in the UK by looking at the most affordable towns, and how many people are looking in that area.

There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.

Many people are quite private when it comes to what is in their bank account. In this short blog, we look into what Brits have saved by age group.