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How to buy the right mortgage

at the best price in 4 easy Steps

Step 3 : Mull the figures over
Make sure you take enough time to mull the figures over, this might take a week or so. Remember, chances are a mortgage is your largest financial commitment, dwarfing all your others, so choosing the right one shouldn't be rushed.

When thinking about the different mortgages on your grid spend time on the following points.

See what the advisers/brokers have suggested

It's always worth paying attention to what a mortgage advisor/broker recommends. One reason is that depending on how large their firm is they can offer exclusive deals to their clients which aren't available anywhere else.

But I'd still advise you to look closely at their figures taking special care to understand how the charges and fees work.

Also, make sure you understand how the mortgage broker charges for his advice. Most advice will be free (they collect a commission from the lender) but some do charge. If they do make sure this figure is taken into account.

Look for and compare flexibility
Compare the flexibility of each mortgage against one another.
  • Flexibility relates primarily to early redemption charges, so you want these to be 3 years or under, ie if you want to move to a better mortgage after 2-3 years it won't cost you any money (or a nominal sum)
  • Remember, the more flexible a financial product is, including a mortgage, the better it is
  • Who knows for example what you or your family's financial situation will be like next year, the year after or even in 5 years?
  • So always look for the ability to make overpayments and underpayments
However, balance flexibility with the price of the mortgage
What I mean is that many of the best deals are inflexible for the first 1-5 years whereas more expensive deals can offer far more flexibility, at least in the short term.

Personally, I wouldn't mind taking out a great value mortgage today with reduced flexibility for the first 3 years as long as it became more flexible as time progressed. For example -

  • During the first 3 years it might charge 5% of the total loan value to cancel the deal plus strongly limit the amount that can be overpaid per year
  • But in year 3 and beyond the redemption charges expire (or get heavily reduced) and I can overpay more, this would then make the deal far more flexible
You're almost there
You've now spent a fair amount of time researching the mortgage market and are probably seriously considering between 2 - 12 different mortgages.

However, as indicated at the beginning of this guide because you don't work in the mortgage industry the lenders probably still have the upper hand. It's therefore possible you might have missed some of the small print tricks which normally translate into sneaky charges. And it's charges and fees that almost always make the difference between a good mortgage deal and a bad one.

So in the next Step you're going to be asking your broker/lender 3 simple yet fail-safe questions that will cut right to the heart of whether a mortgage deal is good, so-so or one to avoid.

Important point re fees and charges

Most lenders offer the option of how to pay the mortgage fees. Up front in cash or the amount gets added to the overall loan with interest on top. So a £900 fee today could well cost many thousands over 20 years.

Agreeing to pay fees over such a long period of time is a great move for the bank, not such a financially sound one for you. However, I do admit that many people might struggle to pay for example total fees of £1,500 and will be forced to add them to the loan.

But this highlights the importance of having a flexible mortgage because if the fees are added to the loan you'll have the option of paying them off over a shortened period of time, perhaps a few years.

This can be done via overpaying every month.

For example, if your mortgage repayment is £1,000 per month, make it £1,050 for a few years and that will take care of the fees. Yes, you will have been charged interest but for a much shorter period of time and that's good personal finance.

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