The world of mortgages can be intimidating and confusing, with a lot of industry jargon and all lenders having their own criteria. As a borrower, it is not always clear what the right product is.
Can I arrange my own new mortgage deal?
You could spend considerable time approaching every bank on the high street to find the best interest rate, but what about the lenders that aren’t on the high street?
Most non-high street lenders will only arrange a mortgage through an intermediary or a mortgage broker, meaning that a vast percentage of lenders aren’t accessible to those borrowers who go it alone. If you do manage to find yourself a mortgage, how do you know that the mortgage you have chosen is the right product for you?
If you do manage to find yourself the best interest rate, you may not be able to borrow as much as you could from a different lender.
Each lender has different criteria for how they treat income, employment, residency and much more. This can drastically affect the amount you will be able to borrow from a particular lender.
How can a mortgage broker help?
As mentioned, an adviser or broker will be able to source mortgages from a vast range of lenders from the high street to more specialist lenders.
We at Fortune Financial, based in Hitchin, Hertfordshire, use a panel of lenders that represent the entire UK mortgage market to create a bespoke, tailor-made recommendation based around your unique circumstances.
We will advise on what type of product and repayment method is best suited for you to help you achieve your goals, whether you want to move home in a few years or retire early. There is a wide range of products available, with the most common being a fixed rate product.
Fixed rate mortgage products are a set amount of time, generally 2,3 or 5 years but it can be anything up to 40 years with certain lenders!
Other products include:
- Offset Mortgages
- Discount Mortgages
- Tracker Mortgages
- Cap and Collar Mortgages
- Stepped products
When we produce our recommendation, it is not solely based on the lowest interest rate available. We establish which product is the most cost-effective over the chosen product term.
For example, if the client is looking for a 2-year fixed rate product, we will search for the product that will cost the least over those 2 years, taking into account the interest rate, the associated fees and any cashback feature.
We regularly see that the most cost-effective product will actually have a slightly higher interest rate than other products, but because the fees are lower, over the chosen term the cost can be considerably lower. Often saving the customer hundreds, if not thousands of pounds.
When is it best to change mortgage?
For people coming to the end of their fixed rate period, I cannot stress enough how important it is to not allow your mortgage to go onto the lenders standard variable rate (SVR)!
It is a common misconception that there is nothing you can do about it. The SVR will, more often than not, be higher than the available fixed rate products. Plus, as the name suggests, the rate varies at the lenders discretion so you are at the mercy of then lender when it comes to how much you will pay each month. We all like consistency when it comes to our bills.
Choose the right mortgage for you
There is nothing worse than not knowing how much you will be paying each month. It means that you just don’t know how much money you will have each month to be able to enjoy life. 6 months before your mortgage is due to move onto the SVR you should be looking for a new deal.
There are two options:
- A product transfer with your current lender
- Re-mortgage with a new lender
With a product transfer, your lender will generally contact you when your deal is nearing its end with an offer. This offer will generally, on the face of it, look like a good deal. It might even be better than your current deal.
Agreeing to this offer could prove to be a costly mistake if you haven’t explored all of your options. Most people wouldn’t automatically renew their car insurance with the same provider before shopping around, and most of us would change insurer to save just a few £’s a month. So, it amazes me that people won’t shop around for a better mortgage deal, that could save hundreds or even thousands.
Firstly, with a re-mortgage, the offer will last for 6 months so you don’t need to worry that the mortgage offer will runout before the current deal is up. Secondly, this allows you plenty of time to ask an adviser to find the best deal for you, without the risk of the product reverting to the SVR.
Finally, the sooner you secure your new mortgage deal by applying for your new mortgage, you allow the solicitor plenty of time to complete the necessary work without stressing yourselves out, worrying if it will be completed in time.
Lenders are constantly changing their products and so interest rates and fees can change at a day’s notice. The sooner you secure your mortgage, the sooner you can have peace of mind and begin to budget and plan for the next few years with your new mortgage.
With the Bank of England due to increase the base rate again in the coming weeks and months, we will soon see further increases to the record low interest rates brought about by the pandemic, meaning now is the right time to secure a great deal for the coming years. Saving you a considerable amount of money and stress in the process.
Mark Seddon
Managing Director and Mortgage Adviser in Hitchin, Hertfordshire
