| Now that interest rates have dropped to their lowest for many years, many people are finding that their fixed rate mortgage which seemed such a good deal 2 years ago is no longer competitive. Tracker rates are a much more attractive proposition, and there are still some good deals to be had on the market if you know what to look for. If you can raise a 20 to 25 per cent deposit, you should be able to negotiate a decent deal, but the best deals will be for those fortunate enough to have a 40 per cent deposit or sufficient equity in the property. (Equity is the difference between the value of the property and the amount you want to borrow against it). Deals for those with lower deposits available are less competitive. If you are shopping around for a new mortgage and have, for example only a 10 to 15 per cent deposit, then the best deal is probably going to be a standard variable rate (SVR) mortgage - once seen as an expensive option against fixed rate deals, but worth considering until markets stabilise and you can negotiate a fixed deal at a good rate in the future. Some lenders are warning that their SVR rates will not fall much further, so it may take a while before a decent fixed rate is available. Do some research - if your lender is one of those who is not passing on cuts to customers, it may still be time to consider a tracker or a fixed rate mortgage. If you currently have a fixed rate mortgage, consider very carefully before you decide to pull out. Your lender will probably charge an early redemption fee, which may well cost you much more than you would save by moving. Tracker Mortgage Deals - Tracker mortgages represent a great deal at the moment. These go up or down in line with bank base rates. One thing to check with trackers is whether or not they have a floor or "collar" level. A collar level is the lowest rate that a lender will go down to. Halifax, at the moment, is not enforcing its collar, and Nationwide have lowered their previous level. It's important to check, as even the low rates around now could fall even more, and you don't want to be tied to a rate which could go even lower. Offset Mortgages - Lower interest rates for savers may mean that if you have savings, you could utilise them better by going for an offset mortgage. Offset mortgages set savings against the outstanding mortgage, and you only pay interest on the balance. For example, if you have a 150,000 pounds mortgage, and have 50,000 pounds in savings; offsetting the savings against the mortgage means you only pay interest on 100,000 pounds of the mortgage. You can still access your savings if necessary, but if they are left in place, your mortgage payments will be lower, and your mortgage will be paid off much faster. Interest Only Mortgages - With an interest only mortgage, your monthly repayments do not reduce the capital sum owed. You are reliant on increasing housing market prices to enable you to pay off your mortgage at the end of the term. At the moment, with interest rates dropping, your payments will have gone down (unless you were on a fixed rate). This is a good time to switch to a repayment deal, which will mean you are paying off some of the capital sum. Your repayments will go back to where they were, but you will actually be buying your house (an interest only deal means you are in effect, "renting" the property from the lender). Another option would be to invest the money you are saving on reduced payments into cash ISA, which could be invested back into the mortgage when it matures. Negative Equity - Negative equity is when your property is worth less than the outstanding mortgage balance, and is a concern for may people in the current market. Negative equity is a real problem if you want, or need, to move home. Once the market picks up and prices start to rise, even slowly, you may find you are back "on track." If you find yourself struggling to make your mortgage payments the first thing to do is talk to your lender to see if they can help. If you are experiencing difficulties, it may be better to switch to an interest only mortgage for a while, to reduce monthly payments. Do you want more information about which type of Mortgage, to get. Then visit Brokers Online for information, articles and a great deal on Mortgages and Remortgages. Brokers Online also provides its UK clients with articles and quotes surrounding Debt Management, Debt Advice, Debt Help, IVA and Debt Plans. |
