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Look Beyond the Headline Rates
The APR (Annual Percentage Rate) of a mortgage is
often the main concern for someone looking for a cheap mortgage,
and it is of course one of the most important aspects to take
into account, however you should look beyond the headline rates
offered by the lenders and check to see if they have a catch to
them – in many cases very low rate deals do have hidden
costs tied to them.
Offering a low introductory rate for their mortgages is a very
good way for lenders to attract customers – they see the
lender at the top of the best-buy tables and assume that the low
rate means a good deal. As many have realised, the introductory
rate does not tell the whole story and close attention needs to
be paid to the lender’s standard variable rate (SVR) as
well as to what early-repayment penalties there are associated
with the mortgage.
Knowing the SVR is important, as this is the rate that the mortgage
will revert to after the introductory period has ended and the
rate that you will in all likelihood be tied to for a period of
time, unless you are willing to pay the early repayment charges
and switch mortgages.
It is very important to find out if such charges do apply, and
how they are charged – in many cases they are charged as
a percentage of the mortgage, and can last for as long as a decade
after the mortgage is taken out. There are a number of lenders
who don’t tie you in with such charges, and it is worth
your time looking around to see if you can find a deal that does
not tie you in – they can be found at rates that are surprisingly
close to those with long tie-in periods.
Opting for a mortgage that doesn’t quite match the lowest
rates on offer, but does not tie you in once the introductory
rate is over can often be the better choice in the long run, as
you will have the flexibility to switch to a different mortgage
without penalty at a later date to take advantage of lower rates
elsewhere.
A mortgage is a long term commitment, and you should approach
it as such – look beyond the deals that are offered in the
‘here and now’ as these will invariably end, concentrate
instead on what the mortgage offers you in the long run –
one that gives you the freedom to switch when you like will put
you in a position to be in full control of where you are borrowing,
allowing you to switch if a better deal comes along.
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