The Cheapest Mortgages Aren't Necessarily The Best

A feature article by NickR7, Nov 07, 2007         

Summary: All providers would say they provide cheap mortgages, but there is more to mortgages than meets the eye. Its worth doing your own research before approaching a broker or advisor.

 
It’s unlikely that any would-be borrower would look for an expensive mortgage deal! It is equally unlikely that any mortgage provider would advertise themselves as providing expensive mortgages. That means that all providers will be likely to say that they provide cheap mortgages. So how do you work out which really are the cheap mortgages? There are a lot of factors that go into determining which mortgage is right for you, and they nearly all depend upon your individual circumstances. Therefore, when you walk down the high street and see big adverts in the windows of the big banks, telling you about their latest cheap mortgage deals, you can be fairly sure that it doesn’t apply to you. There are more than 8,000 mortgage products on the market today, so it is highly unlikely that an advert you see on a bank’s hoarding will be the right one for you. In fact, recent research has shown that of the top 250 mortgages in the UK, only six come from the big banks. The others are available at building societies and other smaller lenders. It is advisable to do some mortgage research of your own. Find half a dozen websites on the internet. Read what they are saying about mortgage types, understand what they mean by variable rates, fixed rates, capped mortgages, discounted mortgages, SVRs, periods, penalties etc. Get to know the terms, and get an understanding of all the fees involved. It is quite likely that a cheap headline mortgage rate will be accompanied by a hefty mortgage arrangement fee, but a seemingly worse interest rate might have a lower fee attached to it. How do you know which is best for you? Mortgage calculators can help, but tend to only show you the monthly repayments you will have to make. Try and find one that takes into account all the fees involved, including valuations, legal fees, stamp duty etc. Then you might be able to make a sensible comparison over, say, five years. If you can’t find one online, make your own spreadsheet. If that is not something you would be comfortable with, at least by doing some reading you have some understanding of the terms involved. Now, however, it is best to approach a mortgage broker or mortgage advisor to make use of their services. These people have access to the whole of the mortgage market, but are not tied to anyone in particular. That means that they can take your individual circumstances and almost tailor a mortgage to suit you. They will discuss your needs with you and because you already have some knowledge of mortgages from your reading you will be a better position to make sensible choices with your broker or advisor. The result of that is that you will get the best mortgage deal for you. It may not be one of the cheap mortgages you see advertised on your high street or on the television, but you will be getting a better deal than by simply choosing an apparently low headline rate.

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