Firstly, congratulations! If you are reading this article, chances are, you are going to or you plan to buy a house. However, if you are a first time home buyer, you may have no experience in buying a property or getting a mortgage and this can be a pretty daunting task. Everyone wants to get the best mortgage rate possible so, in this article, we will share some top tips in getting a better mortgage rate. Getting a good mortgage rate can save you a lot of money in the long term and I’m sure you don’t want to be overpaying mortgage interest rates.
Best Practice for the Best Rate
When discussing mortgage rates, you need to understand the process by which a lender decides which deals they can to offer you. They decide this primarily on your credit score. A good credit score is a necessity when applying for mortgages as it shows the lender that you are reliable. This is especially important if you’re applying for your first mortgage when a lender usually views you as an unproven or even risky borrower.
A low credit score is not necessarily the end of your mortgage dreams, a lender may simply preclude you from being offered their lower interest rate loans, offering you instead, their higher rates to balance the risk.
Advisors and Deposits
Another option you have when searching for a better rate is the services of a mortgage broker or mortgage advisor like Blutin Finance. Their primary function is to search the market looking for the best deal that you will likely be accepted for. This is especially useful because the broker will be able to steer you away from lenders who are less likely to accept your application. When dealing with brokers it is important that they are whole-of-market, meaning they search the entirety of the mortgage market when building your evaluation, and willing to include direct-only mortgage deals.
If, however, you wish to forgo the services of a mortgage broker, a good starting point for your search might be your bank. Banks often offer loyalty discounts on mortgages to their customers. However, other lenders are getting in on the trend of offering loyalty rewards to their existing customers. This is drastically different from the traditional model where the best deals are exclusively offered to new customers.
With or without a broker, the benefits of going through the market with a fine-tooth comb are immeasurable and cannot be understated. It is important, however, to keep in mind that there are a lot of deals out there that are broker only, meaning you will not be able to access those deals without the services of a broker.
Your deposit is another aspect of the mortgage process that can dramatically affect the rate offered by lenders. A first-time borrower might be able to get a loan with a 5%-10% deposit using the help of the government scheme, which is an Interest-free (for a specified period) loan that helps increase your deposit up to 20% of the value of the property. Traditionally a person with around a 20% deposit can expect a decent rate on their mortgage. However, at the 40% deposit mark lenders tend to offer the best rates.
The deposit is also your best weapon against a low credit score. This is because a higher deposit means a smaller loan, easing the risk of lending.
Know Your Fees
Fees are as unavoidable as tax in this modern world, as such it is important to know exactly what charges are being applied to your loan as you move through the process of getting your mortgage. It may be that the perfect mortgage you’re looking at has some eye-watering fees attached that make the cost of the loan outweigh the benefits of your low-interest rate.
The three main types of fees you need to be aware of when applying for your mortgage are the arrangement fee, the overpayment fee, and the early repayment fee.
The arrangement fee is the fee associated with the administrative cost of processing the loan. This fee can go as high as $2,000 and you will often see that a mortgage with a lower interest rate has a high arrangement fee on the side.
Most mortgages will allow for a fixed percentage of the loan to be overpaid each year. Overpayment is the process by which you reduce the overall debt by paying back more than the specified monthly rate. The accepted percentage of overpayment differs between lenders, but it can go as high as 10%.
An overpayment fee may be charged as a percentage of any overpayment amount. For example, there may be a 5% fee on the value of any overpayment. If your lender includes an overpayment fee it may be more cost-effective to maintain the monthly repayments for the term of the loan.
Early repayment fees are similar to overpayment fees in that they charge the borrower for reducing the debt over time. Not all lenders include an early repayment fee, so it is worth reading the terms and conditions of your speculative loan just to be sure.
Hopefully, this article can help you get a better mortgage rate. There is lots of advice online on how to find a good mortgage broker. Another tip that is also very useful is to ask your friends who have taken out a mortgage before for advice. They have been through this process and are a very good source of information. While there are many resources online, asking someone you know is always a good idea to get unbiased mortgage advice.
Finally, we hope that our advice has helped you and remember to do your research before making decisions. It is important to get everything right and spend time to research mortgage advice before going ahead with a certain mortgage plan.