Five steps to the right mortgage!

Finding the right mortgage can make a massive difference to your peace of mind, your quality of life and the amount of money left in your wallet. Too many people don't put in the work required to find the right mortgage. They are the only losers! The mortgage lenders will happily be taking their money. But it is not hard to make the right choices. All you have to do is follow these five simple steps:

• You aren't a standard person, you're an individual; so don't put up with being on the standard variable rate (SVR). Make sure you shop around to save yourself money.
• The only hangover worth having is one you can cure with a couple of aspirin the morning after the night before; don't get a mortgage with a special rate that then ties you in to the lender's SVR for years to come.
• Just like Sam Goldwyn's verbal contract, newspaper best buy tables aren't always worth the paper they're written on! The mortgage market is huge, fluid and fast moving, even when base rates are at a standstill. Check more up-to-date sources (like this website!).
• You may find it useful to use a mortgage broker to help you but what you don't have to do is pay for the privilege. Very few people have circumstances or requirements so complicated that they need to pay fees to a mortgage broker to sort out their mortgage. So make sure your broker is fees free!
• Don't fall for what looks like a cheap mortgage with expensive bells and whistles attached. If your mortgage lender is insisting that you take out its own brand insurance policies then you should insist on taking your business elsewhere. Such policies are usually expensive and you will be able to get the same or better elsewhere for less.

Beware your mortgage's bad habits

Can a mortgage have bad habits? Oh yes. The first bad habit is the annual review. Your mortgage lender may have sold you on the idea of an annual review because it provides clarity and certainty about the size of your mortgage payment each month for a full twelve months.

What they won't have mentioned is that it also means they don't need to inform you about interest rate changes except once a year. Bear in mind it costs the average mortgage lender several hundred thousand pounds to administer a rate change and youll see why some of them rather like annual reviews.

Another bad habit your mortgage could fall into is turning into the proverbial old boiler/battleaxe/slob/couch potato (delete as appropriate). You may have fallen in love and got fixed up with your mortgage a couple of years ago when it was lithe, slim, trim and incredibly low in interest rates. But, as with all relationships, a couple of years down the track, it will let itself go, slob out and start demanding more interest. What should you do? Trade it in for this year's model, of course! I realise this may not be the appropriate answer for other relationships dont blame me for break-ups.

What you cannot do is ignore your mortgage. You need to take time to check the mortgage interest rate you are paying and see whether you can find a better deal. You won't pay the mortgage off by paying a higher interest rate than you need to. Thats just a way of redistributing your wealth to somebody who deserves it less! Take this to heart: the average standard variable interest rate is more than two percentage points higher than the best deals currently available.

You may be facing early repayment charges to get out of an uncompetitive mortgage deal. You may find it is still worth breaking your existing arrangement to move to a cheaper mortgage. This is where a mortgage broker can help you decide.

10 November 2005 © Moneyextra.com

back

Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.