Welcome to another exciting blog where we explore the ins and outs of financing your new home purchase or organising a remortgage! In this article, we’re focusing on a crucial aspect of your mortgage journey: interest rates. After all, with all the current scaremongering around interest rates, who doesn’t love the sound of a fantastic deal that promises financial comfort and convenience? So, let’s delve into how you can ensure you’re getting the best interest rate on your mortgage.
First, let’s briefly understand what an interest rate is all about. For all intents and purposes, it’s a percentage of your loan that lenders charge for the privilege of borrowing their money. The lower this rate is, the less you will pay in the long run. But how can you make sure you’re getting the best deal possible?
Knowledge is Power
Start by educating yourself. Understanding how mortgage rates work will give you an advantage when shopping around. They fluctuate based on several factors, including the general economic environment, the base rate set by the Bank of England, and inflation. Keeping an eye on these trends can help you foresee potential rate changes. Consider signing up for rate alerts or using online mortgage calculators to help you keep track.
Boost Your Credit Score
Your credit score is a crucial factor that lenders consider, as it is a measure of your reliability as a borrower based on your past financial behaviour. Higher scores generally lead to lower interest rates – so it pays to look after your credit rating. Start by requesting a free credit report, then develop a plan to improve your score if needed. This could involve paying down debt, paying bills on time, or correcting any errors on your report.
Shop Around
One of the best ways to ensure you’re getting the best rate is by comparing offers from different lenders. Don’t be shy to shop around and ask for quotes from various banks and online lenders. You might be surprised how different rates can be from one lender to another.
Consider the Loan Term
While 30-year fixed mortgages are common, shorter terms such as 15-year mortgages often come with lower interest rates. Of course, this means a higher monthly payment, so weigh this decision carefully to work out if you can afford the shorter-term option.
Save a Bigger Deposit
The larger your deposit, the smaller your mortgage loan needs to be. This can increase your chances of securing a more favourable interest rate and therefore reduce your monthly payments.
Lock in Your Rate
When you find a rate you’re happy with, consider locking it in. Most lenders will allow you to secure the rate for a specific period while you finalise your home purchase. This can protect you if rates rise before you close. You can also secure an interest rate with most lenders up to six months prior to your fixed-rate deal coming to an end.
Consider a Mortgage Broker
If all this sounds overwhelming, remember that you don’t have to do it alone. Mortgage brokers can help you navigate this process. Our mortgage advisors have access to the whole of the market and may be able to secure a lower rate than you could on your own. For more information on how a mortgage broker can help you, click here.
At the end of the day, securing the best interest rate involves a blend of persistence, strategy, and a little bit of luck (timing can be everything!). Remember that while the interest rate is crucial, it’s not the only factor to consider. Also, look at the overall cost of the mortgage, including fees and other costs.
Remember, it’s not about finding the cheapest loan; it’s about finding the most cost-effective one. The best mortgage is one that suits your financial situation and goals. It’s okay to take your time, ask questions, and make sure you’re comfortable with your decision. After all, your home is usually your biggest asset, and it’s essential to ensure you’re making the right choice to keep it secure.
So, go forth with confidence! And if you’re feeling unsure, contact us, as we’d be happy to help you with the process of securing a mortgage and feel safe that you’re getting the best interest rate out there for you.