Choosing and securing the right mortgage can help you save thousands of pounds and this would also be a means to own a home in a shorter span of time. Thus, it is important to take some time in choosing a mortgage that would work best for your finances. Here are some steps to help you in securing this:
Deciding on How Much One Can Afford to Borrow
Before starting your search for a mortgage, you need to consider your finances to determine what you can afford. Most mortgage lenders will allow their clients to borrow 3 to 4 times their annual salary. However, this would depend on the client’s current situation and credit rating. There are online mortgage calculators that one can use to check on the monthly payment amounts for certain mortgage amount. When determining this, it is important to remember that a mortgage is actually secured against your property and you can lose the property if you fail to settle the monthly payments.
Work Out Your Loan to Value
LVT or loan to value will play a big part in determining the deals on mortgages that you are likely eligible for. In addition, this will also determine how expensive one’s mortgage will be. One can calculate this by means of comparing one’s loan against the current market value of one’s property. Generally, high LVT mortgage and first time buyer mortgage rates are often higher compared to other deals. There are better mortgage rate options available for those with lower LVT.
Deciding Between Interest Only and Repayment Mortgages
There are two types of mortgage and you will need to decide which one would best suit your needs. Repayment mortgage is the most popular type. This works the same way as most loans where the monthly payment is split. One part pays off the interest while the other part pays off the outstanding mortgage. On the other hand, interest only mortgage is designed to run alongside a separate savings plan that you will use to pay off the mortgage. This is necessary as the repayments will only cover the interest that you are borrowing and it will not be used to reduce the borrowed amount.
Decide on the Length of the Term
It is important to decide on the length of the term. You should consider the mortgage term that will strike balance in clearing the mortgage as soon as possible while still making the monthly repayments affordable.
Choosing the Best Mortgage Deal
You should also consider the best mortgage deal that would suit your circumstances. The mortgage deal will determine how you will be charged for the interest rate during the term of the mortgage deal. In addition, this will also determine the interest amount and how high the monthly repayments will be. The 3 common types of mortgage deal are fixed, discount, and tracker mortgages.
Compare Mortgage Rates
After deciding on the mortgage deal, the next thing to do is to start comparing rates from different providers.
Check the Mortgage Fees
On top of the mortgage rates, you may also need to pay upfront mortgage fees. However, you can shop for those deals that do not require mortgage fees. Some providers actually offer fee free mortgages.
These are some steps to consider when looking into fee free mortgages. Once you are able to decide the best mortgage, you can submit your application right away.