Compare Mortgages

One of the most important aspects of buying a property is the mortgage interest rate that you can obtain. After all your looking to borrow the amount required for your property for the lowest possible cost.

Standard variable rate is the typical rate of interest that lenders use and it is generally the most expensive option for the borrower.  The standard variable rate is the rate of interest decided by the lender which maybe loosely connected to the Bank of England base rate by a margin normally around 2%.
If you are on a standard variable rate then you may notice that some lenders like to involve any rate increases with effect straight away. At any rate the standard variable rate is not the cheapest option available (based on circumstance). As a independent broker we can help you take advantage of any cut-price offers from other lenders.

A fixed rate is exactly as its called, the rate of interest is fixed over a certain period of time, generally between 1-5 years. Fixed rate mortgages are generally easier to manage since you’ll know how much is needed for the monthly repayments on your mortgage. The fixed rate mortgage is ideal for people who maybe under financial stress and need to know where they stand from cheque to pay cheque. Fixed rate mortgages are also suitable if interest are set to rise in the early years of a mortgage. Be aware that mortgage providers are usually one step ahead to adjust fixed rates accordingly. A Fixed rate mortgage means you could end up stuck with paying more then others if the interest rates fall below the figure you’ve adjusted yours to.

Discount rates are a percentage of the lenders variable rate, so your repayments will rise and fall in accordance with the lenders normal rate but you will be paying at a reduced rate over an according time period. This is ideal for first time buyers as a discounted mortgage can give you a few years of breathing space. A 1 -2% discount is very good if there is no lock in period afterwards, with the benefits of this come the ability to remortgage with another lender when the discount rate period draws to an end. Unfortunately you may often find you are locked in for another couple of years on the variable rate so you will not be able to get out of this sort of deal unless you are prepared to face huge redemption penalties. Discount mortgages offer good value for money – but only if there is no lock-in period once the discount has come to an end.

A capped rate will put a barrier to your interest rate you will pay over a certain period of time. If the lenders variable rate exceeds the capped rate then it is here you will benefit, but if the interest rate falls below the capped rate then you will paying the same as many others.
Capped rates will tie you into a mortgage for a certain period of time, usually between 1 and 5 years although recently there has been an introduction of capped mortgages for 25 year periods.
Capped rates give you a mix of advantages of the fixed rates and variable rates, again something is expected in return for this, the capped rate is likely to be higher than any fixed rate you can get. Like fixed rates the capped rate will make financial sense for those who are financially stricken.

Tracker rates tend to follow the Bank of Englands interest rate with a margin either above or below the rate, this is decided by the lender.
How will the interest be charged? Ignoring the type of interest rate you decide to go with one vital question to ask is how frequently is the interested calculated. If you decide to go for a mortgage where the interest is calculated daily then you will find yourself paying less interest over a period of time because every payment will reduce the amount you owe. Current account and flexible mortgages charge interest day by day. If interest is calculated monthly you could end up paying more and you can end up waiting a month after a payment is made before the interest is recalculated. But some lenders have their foot in the door by calculating the interest payable on the amount due at the start of the year and this could make a significant difference to the amount of capital reduction over 12 months. It also means that if you make an additional payment to reduce your mortgage it could be up to a year before this reduces the amount of interest you are charged.

You can compare mortgages by looking at the amount you need to pay every month. Don’t be fooled by latest headline rates as they can be misleading as we know different companies charge different interest rates in different ways. The ideal target is a competitive interest rate that carries no redemption penalties so that it is cheaper to move your mortgage elsewhere if more attractive mortgages become available.

By law mortgage providers have to provide an Annual Percentage Rate (APR) for their products. It illustrates the true underlying interest rate, including all the charges, over the entire term of the loan. This means it adjusts for things such as annually charged interest. Comparing the APR of one loan against another can also help you get a better feel for which is the most competitive.

A reverse mortgage can be an attractive option for many home-owning seniors that are having a hard time making ends meet. With a reverse mortgage, a senior homeowner will receive money for their home equity from a lender without having to make repayments for as long as they live in their home. So with the right reverse mortgage a senior homeowner can maintain their standard of living while retaining ownership of their home.

This of course, is the picture that all the reverse mortgage companies try to paint for prospective borrowers. Nonetheless, there are many differences that have to be understood between reverse mortgage’s and conventional loans. If these differences are not understood, they can cause financial problems for reverse mortgage borrowers.

Disadvantages of Reverse Mortgages.

The first disadvantage is the relative cost of a reverse mortgage. Reverse mortgages tend to be very expensive when compared with a conventional mortgage. This is due to the rising-debt nature of reverse mortgages. For example, a typical reverse mortgage may provide a homeowner with a £300 per month payment with a yearly interest rate of 12 percent compounded monthly. Over the course of ten years, the homeowner will receive £36,000 in payments, but will owe almost £70,000-almost    twice as much as received.

The second disadvantage is the complex and confusing contracts of reverse mortgages, that can have a tremendous impact on the overall cost of a reverse mortgage to the borrower. The complexity of the contracts often allow lenders and third parties involved in arranging reverse mortgages to not fully disclose the loan’s terms or fees. These numerous other front-end andor back-end fees can also quickly drive up the cost of a reverse mortgage. These fees can include origination fees, points, mortgage insurance premiums, closing costs, servicing fees, shared equity and shared appreciation fees.

Out of all these fees, the shared equity and shared appreciation fees should be avoided, as they can quickly raise the cost of the mortgage without providing any benefit to the borrowers. As an example, a shared appreciation fee can give a lender an automatic 50% interest in the difference between the current value of the home when the loan is signed and the appreciated value of the home when the loan is terminated. What makes the fees unfair is the fees have no relation to the amount that is borrowed.

The third disadvantage is the reverse mortgage payments can affect eligibility for old age pensions, Medicaid, or supplemental Social Security income. Senior’s may not even realize this problem until after they already have their reverse mortgage, and only then do they find out that this can have the opposite affect on a seniors finances then what they were trying to accomplish in the first place by taking out the reverse mortgage.

Another disadvantage is the fact that reverse mortgages reduce the value of a senior’s assets and estate. This will affect the amount of inheritance received by the borrower’s heirs.

How to avoid these hazards

The best way for a senior to avoid these hazards is to be careful when choosing a lender, by obtaining bids from three separate lenders. They should take these contracts to a reverse mortgage counselor for evaluation. This will allow them to accurately evaluate the three contracts before deciding on best one for their situations.