How to Get the Best Mortgage Rate by Knowing Your Sums Those days of banks falling over themselves to offer you a mortgage are history. However, you can improve your chances of taking advantage of available home loans by getting yourself a mortgage makeover, beginning with knowing your sums. Indeed, if you want no less than the best deal around, you have to know the exact amount you need to borrow, how much your home is worth, and what percentage the mortgage is of your property’s value – known as loan-to-value. You can estimate your home’s value by studying similar properties for sale, remembering to deduct a reasonable discount, and using an online home price calculator. The best deals are reserved for those who can make bigger deposits of 40 per cent up, but no worries – if this is too high, lenders can make alternative offers to those who need to borrow 75 percent or under. Above 75 percent is trickier to get a nice rate, but it’s still not impossible to find a mortgage. Remember, greater loan-to-values mean pricier mortgages.
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The length of the deal also has an impact on the rate. Deals good for two years are less expensive than those that end in five years. Mortgage rates are based on an entire range of interrelated issues; the base rate of your central bank and its projected path; the amount a bank or building society should pay savers to attract their money and lend this out as mortgages; and finally, funding costs on money markets. Before choosing a mortgage, you need to consider all of these.
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You should also decide if you want the security of a fixed rate, which is advisable if you think you would be struggling if the monthly payments increased, or are willing to risk a tracker and paying a higher amount if the base rate shoots up. Then again, the rate is not all you have to consider. Lenders also earn an income from fees attached to mortgages. These can be a lot, making a seemingly cheaper mortgage turn out more expensive, so it’s a must that this is added this to your loan’s overall cost as you compare mortgages. Remember, the best mortgage is not always the deal that has the cheapest rate. Super-fee mortgages, where low rates are offered in exchange for a hefty arrangement fee, indicates that borrowers with smaller loans can end up out of pocket if they opt for a bargain rate. As a general rule, bigger mortgages mean better high fee/low rate deals, but you still have to watch out for percentage-of-loan fees, which are pricier than larger loans. Lastly, watch out for any end-of-mortgage charges as well, like early repayment charges and exit fees, along with costs to get your property valued and for the legal purchase process. These can all mount up, but there are always alternative deals that may work out for you if you only just ask your lender for a few options.