Comparing mortgages can be a bit of a mind filed as different mortgage lenders position their mortgage products differently, the key to understanding which mortgage is best is in your ability to truly compare the mortgages being offered.
So, how exactly do you compare mortgages, let's look at the factors that change the cost of the mortgage product being offered.
Most mortgage products now encompass an introductory interest rate that is fixed for a specific term, once this term expires you will automatically transfer to the mortgage lenders standard variable rate.
Introductory interest rates are typically lower than the mortgage lenders standard variable rate and allow you to pay a smaller monthly mortgage repayment during the introductory term. A good introductory package can save you significant amounts on mortgage interest payments.
The standard variable rate is the rate of interest that the mortgage lender provides their typical mortgage product. This is typically based on the Bank of England Interest rate. When comparing the Standard variable rate you should use the actual interest rate and not the APR if shown.
Mortgage setup fees are charged my mortgage lenders for setting up the mortgage. This is normally a fixed fee though it can be a percentage of the mortgage required.
The trick in comparing mortgages is to understand the relative savings offered during the introductory period compared to the mortgage setup fees. Mortgage lenders can be tricky, you may think you've secured a great mortgage deal only to discover the mortgage setup fees are larger that you realised, meaning an alternative mortgage product is actually cheaper.
so, now that you understand the factors that allow you to compare mortgages, it's simply a case of getting your calculator out and totting up the figures. You should also check for any tie-in periods, specifically if the introductory period is five years for example buy you are tied into the mortgage for 5 years. The remaining three years when you make monthly mortgage repayments at the mortgage lenders standard variable rates can make a big difference. Alternatively, you can use our Mortgage Comparison Calculator which will tot up the numbers for you.
Next: How much will it cost to move?
Previous: How do I save a deposit for a Mortgage?