Navigating the world of mortgages can often feel like trying to find your way through a maze without a map. With an array of lenders offering a plethora of deals, each with their own terms, conditions, and rates, it’s no wonder many find the process daunting.
For those looking to find the best mortgage deal, there are common hurdles that can complicate the journey. However, with every problem, there’s a solution.
In this article, we’ll explore the top 5 problems with finding the best mortgage deal and provide practical solutions to help you navigate these challenges.
Challenge 1. Overwhelming Number of Options
Problem: The sheer volume of mortgage options available can be overwhelming. Fixed-rate, variable-rate, tracker, offset, the list goes on. Each type comes with its own pros and cons, making it hard to decide which is best for your situation.
Solution: Education is key. Start by speaking with a mortgage broker and gaining an understanding of the basics of each mortgage type:
- Fixed-rate mortgages lock your interest rate for a set period, offering stability.
- Variable-rate mortgages can fluctuate with the Bank of England‘s base rate, offering potential savings when rates are low.
- Tracker mortgages directly follow the base rate, plus a set margin.
- Offset mortgages allow you to use your savings to reduce the interest you pay.
Consider your long-term financial goals, job stability, and whether you plan to move in the near future. Consulting a mortgage advisor can also help simplify this complexity. They can guide you through the options and recommend what’s best based on your financial situation.
Challenge 2. High Initial Costs
Problem: The upfront costs of securing a mortgage can be high. This includes booking fees, arrangement fees, valuation fees, and potentially higher legal fees. These costs can add up, making it difficult for first-time buyers or those with limited savings.
Solution: Shop around and compare deals. Some lenders offer fee-free deals or cashback to help offset initial costs. It’s also worth calculating the total cost of the mortgage over the initial deal period, including fees, to see which is the most cost-effective in the long run. A mortgage broker can be invaluable here, as they often have access to exclusive deals not available to the general public.
Challenge 3. Stringent Lending Criteria
Problem: Post-financial crisis, lending criteria have tightened. Lenders now scrutinise your income, outgoings, credit history, and even your future plans. This can make it challenging for self-employed individuals, freelancers, or those with a less-than-perfect credit history to secure a mortgage.
Solution: Preparation is crucial. Gather evidence of your income, reduce your debt-to-income ratio, and work on improving your credit score well in advance of applying. For those who are self-employed or have a complex income, consider lenders who specialise in non-standard mortgages. Again, a mortgage advisor can help match you with a lender suited to your specific circumstances.
Challenge 4. Interest Rate Fluctuations
Problem: Interest rates can fluctuate, impacting your monthly repayments, especially if you’re on a variable or tracker mortgage. This uncertainty can make budgeting difficult.
Solution: If stability is important to you, consider a fixed-rate mortgage. This locks in your rate for a set period, protecting you from any increases in interest rates. It’s also wise to keep an eye on the market and economic forecasts. If rates are predicted to rise, locking in a fixed rate sooner rather than later could save you money in the long run.
Challenge 5. Property Valuation Issues
Problem: The mortgage application process involves a property valuation. If the valuation comes in lower than your offer or expected, it can affect the loan-to-value ratio, potentially resulting in less favourable mortgage terms or even derailing the deal.
Solution: Be realistic about the property’s value from the start. If you’re concerned about a low valuation, consider negotiating the price with the seller or looking for a mortgage with a higher loan-to-value ratio. Additionally, some lenders may allow you to challenge the valuation or pay for a second opinion.
Conclusion
Finding the best mortgage deal certainly comes with its challenges, but with the right approach, these hurdles can be overcome.
By educating yourself on the different types of mortgages, preparing your finances, shopping around for the best deal, and seeking professional advice, you can navigate the mortgage maze with confidence.
Remember, the goal isn’t just to find a mortgage; it’s to find the right mortgage for you. With patience, diligence, and the right guidance, you can secure a mortgage that fits your financial situation and helps you achieve your homeownership dreams.
If you’d like help with an Agreement in Principle (AIP), your mortgage application, or protection products available, contact one of our friendly advisors who would be happy to have a chat to guide you through it all.