With UK mortgage rates at an all time low, and house prices falling by 0.1%, now may be the perfect time to consider buying a new home. But even with today’s falling interest rates, taking on a mortgage is a major responsibility. Naturally, you want to find the best deal possible.
Mortgage rates may currently be low, but that’s no reason to take the first deal that’s offered, or to pay more than you need to on the total cost of your home loan. Before you sign on the dotted line, let’s review a few simple tips to help you find the best possible mortgage for your new home.
Credit Scores
Before we go any further, we will assume that you have found a property you are interested in, and that you have a firm idea of how much you can afford to spend on your new home. At this point, before you start looking for a mortgage, it is important to know your credit score as it will have a major impact on the loan process.
Knowing your credit score ahead of time will allow you to negotiate with a lender without them running your credit history. Remember, every time a lender checks your credit history, your credit score takes a ding.
Multiple Quotes
Mortgages are available from a variety of different lenders, and you will want to obtain quotes from four or five different sources. Start with mortgage brokers and savings and loans, and move on to your bank or credit union. Each lender you contact should provide a list of current interest rates.
It is important here to know whether the rates being quoted are fixed or variable. As a general rule of thumb, fixed rate mortgages are always preferable. Your prospective lender should also tell you how long the quoted rates will be available to you, so you understand any deadlines you have to meet before formally applying for your loan.
Keep in mind these quotes will be based on the credit history you have provided, so it is important to be up front about your credit score. When you formally apply for your mortgage, the lender will check your credit score and if the numbers don’t add up the quote you received will be meaningless.
Annual Percentage Rates
When reviewing your mortgage quotes, it is important to consider more than the interest rate. You also need to look closely at the Annual Percentage Rate, or APR. The APR includes more than just the interest on your loan, it also includes any points, broker fees, closing fees, or other charges that you will be required to pay over the life of your mortgage.
It’s important to look closely at the annual percentage rate of any prospective loan. Simply looking at the base interest rate can be a mistake, as any savings on interest can be offset by a high APR. Ideally, you want a mortgage with a reasonable interest rate and the lowest possible APR. When reviewing your assembled mortgage quotes, you should use an APR calculator to help you find the most attractive deal.
Negotiating Charges
Once you have found one or two mortgage quotes that you are comfortable with, it’s time for negotiations. Don’t simply accept the offer as is. If there are any charges that you question, discuss them with the loan officer to see if they can be reduced or eliminated.
Lenders have the ability to reduce, or even waive, many fees associated with your mortgage. Work with the lender to see if the interest rates and points included in your quote can be reduced. Stay alert, however, and make sure the loan officer isn’t reducing one fee while increasing another. Keep your eye on the bottom line.
…and Finally
Finally, when you have found the mortgage that suits you, have the lender work up a written lock-in mortgage. This should include the interest rate and fees which you have both agreed upon. A written lock-in will protect you from any rate increases while your loan is being processed.
Mortgage rates may be at a six year low in the UK, but nothing lasts forever. While Cameron and the Conservatives promise to keep rates low, the future is always unpredictable. But even if mortgage rates remain constant, there is no reason to pay any more than you have to. Keep these tips in mind to ensure that your secure the best deal possible.