Looking for a low cost mortgage makes sense. Those that get the right loan at the cheapest rates will pay back less every month. They will also pay less interest over the term of their deal. But, the different factors in the mortgage process can make finding the best buy deals difficult. What can UK home buyers do to save on mortgage deals?
Who Gets the Best Mortgage Deals and Offers?
A mortgage lender may advertise a low rate deal that looks fantastic but this doesn’t mean that everyone will automatically get it. Lenders often hold back their best offers for customers that best fit a range of criteria.
This isn’t simply down to whether a customer can afford the loan and the necessary repayments. It is also about other factors such as deposit size and credit rating.
A Bigger Deposit & Better LTV Could Open Doors to Lower Mortgage Rates
The higher a deposit a home buyer can put down on their property purchase, the better a deal they may be given. Mortgage lenders often scale their rates based on the Loan to Value (LTV) ratio of the loan. Higher LTVs (i.e. lower deposits and higher borrowing) may not be given the best rates.
If the home buyer can pay a higher deposit and set up a lower LTV then the chances are they will be able to pick products with lower interest rates. They may be able to access better deals. This also cuts the costs of their repayment as they will be borrowing less.
A Good Credit Rating Can Help Save on Mortgage Costs
Each home buyer will have their credit rating checked and rated by a mortgage lender to assess how much of a risk they pose. A good track record will give a higher score than a bad one. The higher the score, the better the deals that may be offered.
Before entering into the mortgage process it may be worth running a free check on credit records. In some cases problems can be remedied or the history can be cleaned up for the future. Bear in mind that bad credit may see mortgage applications rejected as well as given higher rates so this is worth doing before the process starts.
The Mortgage Term Can Lower Monthly Repayment Costs
A slightly different way to alter the costs of a mortgage is to look at the length of time that it lasts (the term). Choosing a longer than normal term can be one way of lowering monthly repayments as they will be spread out over more time.
This technique works well for some but does have a downside. A mortgage that lasts for a longer term may be cheaper every month but, over time, it will usually cost a lot more in the overall interest that is charged.
Use Online Mortgage Comparison Site to Find the Best Deals
Shopping around for mortgages works just like shopping around for any purchase. The more lenders a home buyer looks at to find cheap rates and deals, the more choice they will be given in cost terms. This job is made a lot easier by mortgage comparison websites which bring together products in one place for a quick and simple comparison.
Bear in mind that buying a home in the UK is not just a question of borrowing money to fund the property purchase. Individuals may also have to pay stamp duty taxes. They may also want to consider related products such as mortgage payment protection insurance although it is important to assess the pros and cons of this kind of insurance before deciding to take it out.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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