Mortgage Rates Comparison Sites – Do They Give You the Whole Story?

If you are contemplating your first mortgage as a first time buyer, or a remortgage of your existing loan, you would probably think that researching the best mortgage rates would be as simple as going to the nearest price comparison site, answering a few straightforward questions and applying a few filters to suit your mortgage rate requirements.

Now for price comparison sites that make millions from online financial arrangements, that view is one that they try to foster, indeed actively promote. Why wouldn’t they? It makes them millions. Giving advice requires expertise, time effort, adherence to strict Financial Services Association rules, and above all a desire to really make sure the most appropriate advice is provided, even if the advice means no income is generated for the adviser.

Oh, but that doesn’t make money. Far easier to place the decision with the client, and allow them to make the decision. Now I’m all for people power, and people taking responsibility for their own actions, but does it make sense for the largest financial commitment most of us ever consider to come without even the smallest amount of mortgage advice.

Having spent more than ten years providing mortgage advice online talking to people from all walks of life, I am of the firm believe that advice should be made compulsory. All too often I have seen the consequences of an ill considered decision causing problems later on. Mortgage rates believed to be fixed only to turn out to be a discounted rate, where the mortgagee misunderstood that the discount rate was fixed, not the actual pay rate. Those with extended redemption penalties that they had just not realized were present because they hadn’t read the documentation correctly. They were only really concerned about the monthly payment.

Well if you are considering a mortgage, and what mortgage rates will be suitable, my advice would be that you talk to an Independent Financial Adviser. Fee or no fee, seeking advice will always save you money in the long run.

For those that don’t feel professional advice is for them, perhaps just consider the following points when mulling over which mortgage rates are best for you.

Attitude

Do you have a real understanding of the differences between the different types of mortgage rates? Has media hype, adverse publicity or the advice of friends lead you to discount a particular type of mortgage that may be suitable for your needs.

Changes in Circumstances

Do you know what you will be doing in two, three, five or more year’s time? Do you plan to start a family? Is there any expectation that your income may go down? Do you expect a promotion, relocation, and if you did, would you retain the property and let it out lender permitting, or sell it? Might you move abroad, and would that impact on the mortgage repayment type considered?

Early Repayment Charges

Does the mortgage have one, and if so is it just during any product period such a three year fixed rate, or does the penalty extend beyond the benefit period leaving you with the prospect of paying the generally higher lender standard variable rate, or the payment of a penalty which is often equivalent to six months interest?

Can the mortgage be transferred to a new property without incurring the redemption penalty?

Portability

Whilst most mortgage rates are portable to a new property some are not. For those that are you should be aware that portability is not a ‘Right’, but rather just a feature of the mortgage product. To transfer a mortgage to a new property you will still need to meet the lenders underwriting criteria again, and the property will still have to be a suitable security. Also consider the repayment method you select. If you expect to move frequently, is a repayment mortgage advisable? Or would you be better of with an interest only loan and a savings plan that is independent of the mortgage?

Overall APR / Cost for Comparison

Which mortgage is the cheapest, and how do you assess it? Is the cheapest mortgage the best mortgage, after you take all the other factors into consideration? Total cost comparison is a good place to start however. Beware though, as this is the one calculation that many online mortgage sourcing systems do not provide. Comparing the total cost over a given period which includes all the relevant fees and charges will provide a list of products in total cost order. Whether the one at the top is the most appropriate mortgage is a different question.

Affordability

The monthly payment is always a major consideration. Typically a two year discount or tracker mortgage rate will provide the lowest overall cost over that period. Fixed rate security often comes at a premium. Would it be cheaper if interest rates were to rise? How much could they rise before the fixed rate mortgage becomes a better option? And more importantly if they were to rise at what point would the loan become unaffordable?

Flexibility

Does the mortgage allow for overpayments or underpayments where an overpayment has been made? Will it allow for the offset of mortgage interest against a linked savings account? Can you switch from repayment to interest only in the event of financial difficulty? Can you select if overpayments will reduce the term or the monthly payment?

The above are just a few considerations, and can often leave you more confused than before you started, and this is often when the lowest monthly payment becomes the main factor for mortgage rates selection.

The reality is that most mortgage rates are unable to satisfy all your needs, and seeking advice ensures you know which mortgage rate is the most appropriate for your needs having considered all the important factors.

Factors That Affect Your Mortgage Rate

There are going to be many factors which affect your mortgage rate, some of which are under your control and others which you can do nothing about. You should be aware of all of the factors which might affect your mortgage rate and take them into consideration before applying for a mortgage loan. You can take steps to improve some of the factors which affect your mortgage rate and make decisions about when is best to apply based on basic knowledge about your mortgage.

What is a mortgage?

Most people understand the basic definition that the mortgage is a loan which is used to purchase a home. There is slightly more to the mortgage than this. The mortgage is a loan which uses the property itself as collateral. If you fail to make the payments on your mortgage, the property may be taken over by the lending institution who has given you the mortgage.

You want the best mortgage rates

The mortgage is a long-life loan meaning that it is not going to be fully repaid for many, many years. A standard home mortgage is often a fifteen or twenty year loan. This means that you want the best mortgage rate possible because you are going to be needing to pay this rate for a long, long time.

Factors affecting mortgage rates

Major factors affecting mortgage rates include:

o Amount of down payment on mortgage
o Consideration of closing costs
o Income of mortgage borrower
o Life of mortgage loan
o Life of mortgage rate
o Total mortgage loan amount
o Whether or not the mortgage rate is adjustable

Factors making up a desirable mortgage rate

The basic premise of the desirable mortgage rate is that it is within your budget, has a low interest rate and is paid back as quickly as possible. How all of this plays out in terms of each individual mortgage depends upon the independent factors of each borrower. For example, you might prefer a fifteen-year mortgage loan to one that is paid over thirty years. This will allow you to save money over time because you pay less in interest. However, if you can not afford the higher monthly payments and you default on the mortgage loan, you have not helped yourself out any.

Negotiating a desirable mortgage rate

The simplest method of achieving a desirable mortgage rate is to work with a mortgage broker. You will have to pay up front fees to the mortgage broker, usually at the time when all of the closing costs are paid on the home purchase, but you will save money and time in the long run. The mortgage broker plays the role of assessing your personal financial situation and working with lending institutions to negotiate the best possible mortgage rate for your situation. The mortgage broker has experience with all of the factors and terms used in the mortgage loan negotiation and can use this expertise to your benefit.

Repayment of the mortgage loan

When you are working out a plan of repayment for the mortgage loan, you should look at the amount of money available for down payment, the amount you can reasonably pay on the loan each month, the grace period of any adjustable mortgage loan interest rates and any fees owed for early repayment of the mortgage. Working with the mortgage broker, you should be able to develop a repayment plan for your mortgage which allows you to purchase and remain in your home through the life of the loan.

Online Mortgages: Online Mortgage Applications and Obtaining Low Mortgage Rates Online

Mortgage Loans

There are several different types of mortgage loans. Some of the main types of amortized loans represent the adjustable rate mortgage and the fixed rate mortgage. Many mortgages are available online as well as online mortgage quotes.

Fixed Rate Mortgage

Fixed rate mortgage interest rate and the monthly payment is always fixed for the duration of the mortgage loan. Some of the common mortgage terms are 10, 15, 20, and 30 years. In the recent years some lenders have been offering terms that are amortized for 40 and 50 year mortgage terms.

Adjustable (Variable) Rate Mortgage

Adjustable or variable rate mortgage interest rate is fixed for an agreed period of time. After the expiration of this time, it will periodically adjust upwards or downwards according to market index levels. Those indices include the Prime Rate, the London Interbank Offered Rate, and the T-Bill (Treasury Index).

Mortgage Rates : Bad Credit Good Credit Game

Lenders refer to the borrowers’ credit reports and credit scores when approving a mortgage application. The better (higher) the score, the better rates a borrower can obtain. Lower credit scores, however mean higher risk to the lender, therefore mortgage lenders will require higher interest rates in order to compensate for the increased risk.

Balloon Type Mortgages

A balloon, or partial amortization loans are the ones in which the mortgage monthly payments are calculated over a certain period of time. The outstanding principal balance is payable at by the end of the mortgage term. This type of payment of the principal is also called a balloon payment. A balloon mortgage loan can either be of fixed or an adjustable interest Rate.

Online Mortgage Applications and Obtaining Low Mortgage Rates Online

Mortgages online can typically be obtained at lower online rates. Many people save thousands of dollars when applying for a mortgage online or when getting an online mortgage quote.