Cheap Mortgages Can Be a Bad Deal
There are many lenders who now specialize in offering cheap mortgages. These are mortgages that are suitable for borrowers who may not be able to get a more traditional mortgage from a mainstream lender. Cheap mortgages are those that have a low interest rate, but the amount still needs to be paid off over a certain period of time. Usually, these mortgages come with terms that require you to repay the loan early or face high rates of interest. It is important to remember though that although a cheap mortgage is attractive and may seem like a good option in the current economic climate, it is vital to research your mortgage options before committing yourself to anything. Cheap mortgages can still have significant risks attached, so it is necessary to look carefully at the lender and the terms of the loan.
Many lenders offer cheap mortgages on the basis of APR – annual percentage rate. They will advertise their rates and quotes for cheap over the Internet, with many offering introductory rates of up to 3%. Some lenders will advertise cheap rates but make little effort to highlight the costs involved in borrowing the money. When comparing rates it is wise to compare the APR along with other costs, such as insurance and closing costs. Some lenders will offer cheap rates, but after the introductory period expires you will need to renew your loan with a much higher APR.
There are other costs associated with cheap mortgages that aren’t quite as obvious. The lender will charge you an origination fee, which is a one off application fee paid to the lender. This is normally refundable upon the successful completion of your mortgage. This is important because it means that the mortgage lender is being paid for their services. It is worthwhile comparing the fees available with several lenders so that you can choose the one that is most cost effective for you.
Some cheap loans will contain terms that will benefit the lender, rather than you. There are a number of lenders out there that are geared up to provide customers with low interest loans. It is easy to find them and most of them have websites that can be browsed. You don’t need to pay an outrageous interest rate to take advantage of this type of deal. Make sure that the term of the loan is one that suits your needs; many borrowers are choosing to extend their term in order to save money. Another option is to get a fixed-rate loan so that your monthly payments are locked in place at a low rate.
With cheap mortgages there are many options that you can use to make your payment. It is always worth talking this over with your chosen provider. They can give you some advice on which option will work best for you, depending on how long you plan to stay in your property. It is also important to compare this with your current mortgage to see whether you could save money on switching to the new provider.
Another factor to consider when looking for cheap UK mortgage deals is whether you are paying over the odds in your mortgage. Are your monthly repayments higher than those recommended by the lending companies? If they are then you could find a cheaper option. Even if you are paying over the odds for your monthly repayments can still be lower than someone with the best deal, but just don’t expect to get great rates.
Once you have narrowed down the type of mortgage that would be suitable, you should start looking for quotes from different lenders. The easiest way to do this is by going online. There are comparison sites that will help you to compare mortgages from a variety of lenders. This allows you to compare the terms, interest rates and mortgage costs side by side. You can also choose to get quotes over the phone from some lenders if you prefer.
Once you have found the cheapest deal, it is important to make sure that you know the terms and conditions. Most mortgages come with different restrictions such as allowing the provider to sell the house to someone else if you become unable to keep up with repayments. Look through the small print of any contract to ensure that you understand the implications before signing up. Cheap mortgages can still turn out to be a bad deal if you don’t take your time and read the small print of any contract.