Mortgages Comparison
A mortgage is a loan taken out from a mortgage lender to pay for property. It is important for a borrower to compare mortgages before choosing a mortgage. Comparisons between different mortgage lenders allow the potential borrower to find the best deals.
Mortgage Comparison
The large number of mortgages available makes mortgage comparison essential for potential borrowers. Many mortgage comparison websites exist, although independent financial advice is also advised when considering such a large investment.
Repayment Mortgages
Mortgages can either be interest only or repayment mortgages. Repayment mortgages mean that both the initial amount borrowed as well as interest is paid monthly.
Interest Only Mortgages
Interest only mortgages only involve monthly repayments on the interest, but at the end of the mortgage period the initial amount borrowed must be paid. This means that additional saving methods must be used to pay the initial mortgage. Comparison between mortgages should take into account whether they are interest only or repayment, as generally interest only mortgages result in lower monthly payments but higher risk.
Fixed Rate Mortgages
Fixed rate mortgages cause the interest rate on a mortgage to be fixed for a period of time. This period is usually 2-5 years. This allows the borrower to budget for this period of time, as they know the monthly repayment will not change, and any rises in interest rate will not affect their mortgage rates. However, after the fixed period mortgage rates can rise considerably.
Tracker Mortgages
Tracker mortgages mean the interest rate of the mortgage depends upon a base interest rate, most commonly the base rate set by the Bank of England. Interest rates of mortgages are higher than the base interest rate, and tracker mortgages cause the mortgage rate to always be a certain percentage higher than the base interest. This is an advantage because mortgage companies often delay lowering interest rates, whereas in a tracker mortgage the rate lowers immediately.
Buy To Let Mortgages
Buy to let mortgages are for consumers purchasing a property for the rental market. Properties bought to rent are considered a commercial interest. Commercial properties usually have a higher interest rate associated with them as they are of higher risk. However, most mortgage lenders offer buy to let mortgages, where a percentage of the rental income is used to pay the mortgage. Higher deposits are also required.
Self Certified Mortgages
Self certified mortgages are offered to borrowers who are self employed or have erratic earnings. Mortgages usually require proof of income, but self certified mortgages do not. Self certified mortgages usually have higher mortgage rates because they are of more risk to the mortgage lender.
Mortgage Lenders
The most common mortgage lenders are banks and building societies. It is possible to compare mortgages between lenders either through a mortgage broker or a price comparison website. Independent mortgage brokers act as an intermediate between the lender and borrower, conducting mortgage comparison between different lenders. They look for the best deal for the borrower.
Mortgage Rates
A large number of factors determine the rates of mortgages. Comparisons between mortgages should take into account the specific financial circumstances of the borrower. The period of time the mortgage will be paid over and the amount of deposit that can be paid affect mortgage rate. General economic circumstances, such as inflation and interest rates, also change mortgage rates.