There's
a lot of competition between the mortgage providers.
Like
supermarkets they'll use techniques like offering "loss leaders"
to lure more customers (Their pay off is that later on you're not likely to go
elsewhere because of "consumer inertia" - which we've
all got black belts in when it comes to financial products).
Don't be taken in by a low sounding initial interest rate
This
is known as the
headline
rate. Very low rates usually come with cunning long term "tie
ins".
What will happen at the end of the low interest rate term? Do you
have to stay with the same mortgage lender who is suddenly only offering you a
very uncompetitive rate unless you pay a big penalty
(see below) to leave?
A
much better guide to how much a loan will cost is the APR
When
you take out a mortgage you have an agreement with the lender. This covers the
amount you repay and is set for a particular period.
For
example you may have a mortgage for a three year fixed interest rate of 5%.
If
you want to get out of this deal before the three years is up you'd probably have
to pay a redemption penalty. This is a charge which supposedly compensates the
mortgage lender for the time and expense of your leaving.
Some
lenders may try to hide the redemption penalties in the small print.
Simply
ask your prospective lender what the exit / redemption penalties are. If you're
not sure what they mean ask them to spell it out. If you still don't understand
you can take it that there's something they might be trying to hide so walk away.
...
and "Overhanging lock-ins"
This
is a penalty for leaving a lender AFTER a special deal interest rate has come
to an end (ie not DURING the agreed timescale of the deal).
So,
using the same example as above, if you got a mortgage with a three year fixed
interest rate of 5% the mortgage lender could charge you a penalty if you left
after the three years was up, say in year four.
Read
enough? Just want a quote? To get
your best mortgage quote quickly and easily we can
put you in contact with a recommended mortgage adviser. It's free,
completely confidential and there's no obligation at all. Simply
fill out the form below
When
you are looking for a UK mortgage it is important to have
all the information you need at hand. That's where our UK
Mortgage Guide comes in. The Mortgage Guide contains all the
information you need to be able to compare all your mortgage
quotes.
By
going online you might be able to get an instant UK mortgage
quote – this is great news and will help you speed up
your home buying decisions. It is important to have enough
information when buying a UK property and mortgage quotes
are an essential part of that information.
When
looking for a mortgage in the UK, make sure you read our free
Mortgage Guide – it is full of information about UK
mortgages, advice on how to compare UK mortgages and tips
on how to get the best instant mortgage quote possible. It
also has information on buying UK homes – it is packed
full of useful home buying information and it is free.
