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Why you might want to consider a higher rate mortgage

There are some incredibly low mortgage rates around at the moment, with interest rates under 1%. While this might be extremely tempting, it’s worth assessing other options too, including higher rate deals without arrangement fees, as these may be better in the long run.

Typically, the best deals are available to those with substantial deposits, such as 40%, and will have arrangement fees in place, often in the region of £1000 – £1500. 

It’s important to take into account the fees so that you can review the true cost of the mortgage over its full term, ensuring you get the best deal for your circumstances.

David Hollingworth, from mortgage broker L&C, compared a 0.94% deal with a fee to a 1.14% 2-year fixed rate without a fee. When looking at the cost over the first two years of a 25-year mortgage, he found that on a loan of £458,000 or more, it was worthwhile to go for the higher rate and pay the fee.

While many people just add the fee to their loan, it’s worth remembering that you will be paying interest on the fee over many years.

It’s worth speaking to a reputable mortgage broker who can advise you on product availability, deposit requirements, fees, monthly payments on the fixed rate, monthly payments when the rate has ended, and lenders’ affordability checks. It’s likely to be the biggest financial investment you ever make so it’s worth assessing all the options first, with the help of an expert.

If you would like any advice on securing the best mortgage deal for you, please call smarthomes’ mortgage advisor Louise Lewis on 0121 744 4144 (option 2). To find out more about smarthomes’ mortgage service:

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