Make sure your mortgage deal adds up

When it comes to securing a mortgage deal be sure you have your calculator to hand before you sign on the dotted line to ensure you are getting the most out of your hard earned savings, Rebekah Commane advises

[col type=”two-third”]

I’m reluctant to be anything other than optimistic with regards to the direction the mortgage market is taking of late. After all, access to home loans has certainly become less of an enigma in recent times, with rates reaching all-time lows.

Things are looking up for first-time buyers (FTBs) as lending to this category of borrower, renowned for struggling to secure mortgages, reached its highest level since 2007 in the first half of this year. And FTBs now have access to larger loans, borrowing an average of £117,000 in Jun and a total of £3.5 billion was advanced in the month; nothing to shake a stick at.

However, the importance of being aware of all charges included in your loan cannot be overstressed. As advisers frequently warn, research and preparation are key to finding the best deal for you, along with ensuring you’re well versed on all terms and conditions before signing up for what it most likely to be one of the biggest financial commitments you’ll ever make.

Lenders are falling over each other to offer lower interest rates, the latest at a minute 1.48 per cent, thanks to the government’s Funding for Lending incentive scheme. But while the low percentages are attention-grabbing on best-buy tables, they are not the only figures that need considering.

Many of these historically low rates are accompanied by astronomical fees, comparable to when the housing market was at its peak in the early noughties.

The lowest rate is not always the best for you. When doing your research (essential in the mortgage hunt), you may find a percentage point difference between two deals, but a substantial discrepancy in the amount of fees.

In fact, moneyfacts.co.uk has reported that the average fee total for fixed and variable rate mortgage deals currently stands at £1,545, at the highest for 25 years.

That’s not to say it isn’t sometimes worth paying a higher fee if it will save you in the long run.

If you haven’t used the maths you learned in school for some time, now’s the time it will come in handy.

If you’re taking out a bigger mortgage over a longer term, the low rates will likely be of more benefit than low fees. If you’re not great at doing long division in your head, break out the calculator! This applies particularly to first-time buyers who may be drawn in by low interest rates.

The prospect of being in a position to purchase a first property can bring out your blindside when it comes to the small print. It’s only natural that you’ll be thinking about all the possibilities and sense of fulfilment owning your own home can bring you.
Just be conscious of all the added extras that can be included. Signing up for the wrong mortgage could be a detrimental mistake that could potentially cost you tens of thousands in avoidable charges.

There seems to be some kind of a race on when it comes to purchasing a home. Of course the average age of the first-time buyer has increased to, an often debated, 35, but even so, it makes so much more sense to wait until you can get a sizeable deposit together, if you can foresee this being possible. Rushing in to get a mortgage that you can barely afford just so you can say you own your own home is not wise. In fact, that keeping up with the Jones’ attitude was one of the contributing factors in the economic crash, which saw so many in massive debt and some of whom are now in negative equity.

If you have a 30 per cent deposit, hang in there until you can save 35 per cent and you could secure a good value deal such as Chelsea Building Society’s offer; a two-year fix at 1.84 per cent and a £745 fee.

Remember, the higher a deposit you can scrape together the lower your fees will be, the more op

[/col]

[col type=”one-third last”]

[/col]

tions you’ have and the less time you’ll need to take to pay back your loan.