A home mortgage is for most people the biggest single expenditure which they will ever take on. It is a long term financial commitment and getting it right is vital. Comparing mortgage rates before leaping in is a necessity in ensuring that the right home loan for individual needs is met.
By comparison shopping borrowers may well find a loan which is perfect for their needs and could well be from a small institution never heard of before. In the U.K. for instance the mortgage market is dominated by a handful of large key players, but sometimes small building societies can prove to have much more competitive rates. Thus it pays to look at a wide range of mortgage products before reaching a decision.
When comparing mortgage rates everyone wants a low interest rate. There is far more to consider than simply the headline rate of interest though. The application cost and fees attached to a mortgage can vary considerably between lenders and should be factored into the mortgage rate. It can make a huge difference if mortgage fees are high and added onto the loan, as this effectively increases the mortgage rate yet is detailed outside the headline rate.
Another consideration to keep in mind is if the lender charges a PPI, most usually applied when the down payment is less than 20%. Not all lenders charge for PPI and the additional cost can make a substantial difference to the monthly payment. The actual size of the down payment will greatly influence the mortgage rate offered and usually makes it worthwhile to aim to aim for a substantial deposit rather than the minimum required by the lender.
The type of mortgage you opt for should be considered as well as the mortgage interest rate. If a product has a low interest rate, but this is fixed for a short period of time, it could well work out more expensive in the long term than a slightly higher rate that is fixed for a longer period. Those who consider adjustable rate mortgages need to consider the actual costs if the interest rate rises and outline the possible scenarios of payments they may need to meet on a monthly basis.
Another factor to consider alongside the headline mortgage rate is any penalties built into the mortgage. Some lenders levy fees for early redemption or over payments, or lock the borrower into an adjustable rate for a set period of years. What appears to be an excellent introductory fixed rate may well not be such a good deal if the borrower is then locked into an adjustable rate for the next few years with a penalty applied to come off it.
It also pays to compare which lenders allow their mortgages to be portable in case you wish to move home and could end up being charged an early redemption fee.
Whilst seeking out the best mortgage rates don’t be drawn in by simply the headline rate alone but give consideration to other factors which may affect your future payments. Make use of online mortgage calculators so the mortgage rate can be applied to the total costs of the mortgage product to give an accurate rate when total costs are used as the calculated base figure.