Choosing the right mortgage can save you thousands of pounds, but what is the right option – Is it just a case of choosing the lowest monthly payment? Welcome to blog 3 in our 12 step guide to mortgages, and this week our focus is helping you make a better decision on your borrowing.
Fixed rate mortgages
If you’re stretching yourself buying a property and want to ensure your monthly payments remain consistent and manageable for a number of years this could be for you. This mortgage brings stability to your monthly outgoings however, your payments are likely to be higher than other products on the market.
Tracker mortgages follow the Bank of England base rate + a small % on top. This means if the Bank of England lower their rates, your mortgage payments are guaranteed to go down. However the same is true in reverse. It’s a gamble which in the right circumstances, could save you £££’s but if the market goes against you, it could really bite into your monthly income.
The favourite mortgage of a first time buyer. These mortgages typically have very low headline rates which are discounted from the standard variable rate for a number of years. They might be great if you want to make the lowest monthly payments possible, but the rate will not remain constant, so you may find your payments increasing over time and you will be locked in for a number of years.
The headline sounds great and could be ideal if you need a bit of extra cash for furniture when you first move into your property. However dig a little deeper and you’ll probably find that you’re paying a higher interest rate and a higher monthly payment so that the lender can claw their money back.
Offset mortgages have the potential to save you thousands of pounds over the duration of your mortgage IF you manage your money and save well. With an offset mortgage you’ll only pay interest on the sum amount of debt between your mortgage, your savings and current accounts (providing they are with the same lender).
Repaying your mortgage
So you’ve chosen your mortgage type, now you need to consider how you want to pay it back. Mortgages can be paid back in two main ways. The first – known as a repayment mortgage, pays off a little of the underlying debt each month, as well as interest on the loan and at the end of the term the mortgage is cleared.
The second is called an interest only mortgage. With this type of mortgage, you pay-off the interest on the loan but not the capital. At the end of the term you will be expected to repay the capital in a lump sum. How you fund this is up to you.
With so many options to choose from, taking impartial and professional advice could save you thousands of pounds over the life of the mortgage. Contact Credius today for a free consultation at email@example.com or call on 0207 562 5858. For more information about Credius and how we can help with your mortgage visit our website www.credius.com/mortgages.