Which Mortgage Option is Best for You

Deciding which mortgage option is best for you in the aftermath of an interest-only arrangement is something that is difficult to make blanket recommendations on – circumstances change for each individual case. This is where the advice of a professional independent financial adviser (IFA) can ultimately save you thousands of pounds in repayments by making sure you have the right financial coverage for your situation. Research shows that most Brits spend more time researching where to go on holiday than they do on which mortgage is best for them, so you want to make sure you are not in that situation.

The key to making sure you are on the right track with your mortgage choices is to make an informed judgment of what will happen to interest rates in the future. This, in many ways, is part of the problem with people who are re-negotiating their mortgages now because they are finding that fixed-rate mortgages are possibly a couple of percentage points above what they were when they last applied for finance, making this option unrealistic going into the future.
In this case, many buyers will want to consider a tracker mortgage to take advantage of the lower rates, particularly if the downward trend in interest rates persists. Of course, these mortgage deals do have the disadvantage that they rise in the event of the interest rate rising, but many of the funds have an option which will allow you to minimize the risk of this happening to your mortgage. Several lifetime tracker mortgages have no application fees and no tie-ins.

This means that you are protected from interest rate rises by the fact that you are able to leave the tracker scheme at any time and revert to a different kind of mortgage without penalty. Should you be tempted by one of the tracker schemes on the market, and there are some highly-competitive ones available, the key is to move fast. If rates continue to drop, the tracker rates will also drop, and in turn the potential savings you can make will also drop.

Variable rates are the other major option for those coming to the end of an interest-only deal, but this kind of mortgage is more relevant when the interest rates have dropped further and are considered to be coming to the bottom of their ‘curve’. While there are still reductions in rates in the pipeline, a tracker may be the best option. Variable rates are also open to the alleged abuse by the lenders in massaging the rates to their own advantage when it comes time for the MPC to assemble for their monthly meeting.

Conclusion

The financing of your property is the single most important thing to get right, as right from the first property you buy it can influence the amount of equity you build up for future purchases, as well as your immediate lifestyle if you are paying out more than you need to each month.

Research is a key element in deciding what your best option is and you can easily make use of the many price comparison websites that are on the internet. It pays to remember though, that these websites are often middlemen like any other broker, and have a vested interest in your buying through them in order to make money. In this case, you wish to ‘spend’ that commission money on getting advice from an IFA as to the very best mortgage on the market for your circumstances. IFAs are bound by Financial Services Authority regulations to give you the best advice, without bias to any product in particular – a claim many of the price comparison sites are unable to match.
Extracts taken from an article by Tim Betts from Buy Association

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