Mortgage rates are complicated, with broker fees, mortgage fees, introductory rates, and discount offers. Establishing the mortgages which are available to you and then how those offers compare is a minefield.
In this article, we look at the most common types of mortgages, rates, and charges so you can evaluate the differences.
It is often easy to think that finding the mortgage with the lowest interest rate will be the cheapest. These mortgages often include an arrangement fee which can mean that you pay more over the fixed-rate period, compared with a mortgage that has a higher interest rate, but no arrangement fee.
That’s before you investigate cashback mortgages or the tax implications of a staff rate mortgage.
Balancing all these costs together and against each other is where the challenge lies for Mortgage Brokers. This is where the investment could potentially save you money.
Mortgage Interest Rates
The amount you pay back for your mortgage will include the value of the loan plus interest over the term. There are a variety of ways that interest can be charged, and how interest is calculated varies.
Different mortgage lenders offer different mortgage rates, and this means that there are different interest rates, too. There are various factors to consider, such as:
The Bank of England base rate is the primary consideration for interest rates with mortgages. It’s the cost of money as the bank sets it. There is also the London Interbank Offered Rate, and this is the rate at which a bank will borrow from another bank.
A mortgage lender will decide their ‘headline rate’, based on the base rate and Interbank rate combined with their assessment of the risk within the economy, reviewing unemployment levels and the number of repossessions.
This rate is personal to you, and it can differ from the rates that the lenders advertise. Speaking to a mortgage advisor is essential here so that you know what rate you will get. It all depends on your affordability as well as your credit history, and the better your history, the better rate you can get.
What Is APR?
The annual percentage rate is reflective of the mortgage interest and other charges, and it’s a larger measure of the cost to you when you borrow money. The APR reflects the interest rate that you are charged as well as setup fees. This is why your APR is usually higher than your interest rate is.
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What Is LTV?
The LTV stands for the loan-to-value ratio. This is the difference between the amount borrowed and the total value of the property where the deposit is paid upfront.
When you take out a mortgage worth £100,000 and can afford a £10,000 deposit, you’ll only need to borrow £90,000, which gives you an LTV of 90%
You can use our online mortgage calculator to look at how many of the figures change with just small adjustments to these figures.
Try our Free Online Mortgage Calculator to estimate how much you could borrow and your monthly payments.
Interest Rates and Types of Mortgage
Your mortgage advisor will be able to talk you through the available different types of mortgage. The type of interest rate that you get depends on the mortgage.
Fixed-rate mortgages have an interest rate that remains the same for a set duration of around two to five years. This means that you know exactly how much your mortgage is going to cost you during that time.
Variable Rate Mortgages
When you have a variable rate mortgage, you will be charged the standard variable rate of the lender. This can go up and down at the choice of the lender, and you won’t have much certainty about what you pay.
These mortgages track the Bank of England base rate and calculate the chargeable interest based on this.
No matter which mortgage you look into, we can assist you with the right one for your circumstances.
UK Mortgage Broker
If you want to avoid the many challenges and pitfalls of going direct to one lender, or using online comparison websites, then contact our fully trained expert team of Mortgage Brokers and find out how we can help.