Compare Mortgages to Get a Head Start

There are over 8,500 mortgage products on the market. Even the most resolute and conscientious would-be borrower would find it impossible to trawl through that lot, even with most of the information available on the internet. Assuming that you cannot sensibly do such a huge amount of work, there are, however, two things that you should do in the lead up to getting a mortgage.

The first is to do some homework and compare mortgages. With the internet, this is feasible and there is help at hand. The second thing to do is to get yourself a mortgage advisor. These professionals have access to an even wider range of products than you can find on the internet, and they will have tools to help you make a decision as to which is the best mortgage to suit your own personal circumstances.

Before you go online to compare mortgages you should understand the different types of mortgage available to consumers. There are basically two types: the first is a repayment mortgage – also known as a capital and interest mortgage – and the second is an interest only mortgage.

A repayment mortgage is one where your monthly repayments consist partly of the interest on the loan and partly of repayment of the capital borrowed. Monthly repayments are calculated to be the same every month over the term of the mortgage, but in fact there is more interest paid at the start of the term and less capital, and the ratio changes as the term goes on, so that by the end you’re repaying mostly capital and hardly any interest. At the end of the term of the mortgage you will own your home with nothing left to pay.

With an interest only mortgage, each monthly mortgage repayment is solely interest. None of the monthly repayment goes towards paying off the capital loan, which means that at the end of the term the amount of the original loan still has to be repaid. In order to do this, borrowers have to take out an alternative savings scheme so that they can pay off the loan. Such savings vehicles can be endowment policies (very popular in the 1980s and 1990s, but largely discredited in recent years), ISAs or a pension plan. Problems occur with interest only mortgages if borrowers do not maintain their savings plan, and indeed problems have occurred and continue to do so with endowment policies that will not accrue enough interest to pay off the capital loan amount. Fixed monthly endowment payments are designed to make enough money to pay off the mortgage, but they have been much maligned because of poor investment growth rates achieved in a low inflationary environment.

The ability to compare mortgages online can give you a great head start in understanding what your mortgage will cost you. Many websites will ask you for financial data concerning your lifestyle (though taking no personal details to link the figures with you) and indicate what repayments you might be able to afford, and therefore what mortgage amount you might be able to borrow.

Mortgage comparison websites will also give you a list of the top mortgages available, and the fees involved, but it is always best to do your own research, and then go to an independent mortgage advisor who will give you more assistance in getting the right mortgage for you.