How Easy is It to Get a Mortgage With a Cosigner
Housing prices are continuing to rise, with the UK Housing Prices Index reporting that the average house price increased by £24,000 to £278,000 over the last year.
A recent Royal Institute of Chartered Surveyors' (RICS) survey of its members found that 80% of respondents reported an increase in housing prices in April, up from 74% the previous month.
While some experts believe that the housing market will stall soon due to the cost of living crisis, RICS claims there is little evidence of this happening yet.
However, some estate agents have reported that buyers are starting to be more cautious and that some are struggling to get mortgages, so while prices may continue to rise, they may do so at a slower rate.
Whether you're looking to move, remortgage or free up some of the equity in your home, finding the right deal can be a daunting process, particularly right now. Don't panic: we're here to help you answer the important questions.
Which type of mortgage is right for me?
First up you need to decide which type of mortgage you need. Your choices are:
- First-time buyer mortgage – If you've never owned a property before this is the mortgage for you. They usually accept smaller deposits than other mortgages.
- Remortgaging – If you already have a mortgage and are shopping around for a better deal you are remortgaging.
- Offset mortgage – Got a large amount of savings? Pop it into a savings account linked to your mortgage and you could get a better interest rate on your mortgage.
- Flexible mortgage – This is a mortgage with added extras such as allowing overpayments or payment holidays.
- Guarantor mortgage – With this type of mortgage someone else acts as a guarantor, promising to make your repayments if you are unable to do so, which may suit if you are struggling to get a traditional mortgage.
- Equity release – Want to access some of the cash you've built up in your home? With this type of mortgage, you get a lump sum in return for a promise to repay the debt when you sell your home.
- Buy-to-let mortgage – If you are buying a property that you intend to rent out, you'll need a buy-to-let mortgage.
Fixed or variable rate?
Once you've decided which type of mortgage you need, you'll need to get into the detail, starting with whether you opt for a fixed or variable rate deal.
A fixed rate mortgage means you agree an interest rate that will be charged on your loan for a set period of time – usually two to five years.
A variable rate means the interest you pay on your mortgage can change. The main type of variable rate mortgage is a tracker mortgage. This means it tracks a set amount of percentage points above the Bank of England's base rate. Alternatively, it could be a discount rate which means you get a set discount off the lender's standard variable rate.
At times when interest rates are low and expected to stay low for a while, there may be little difference between the cost of a fixed rate and variable rate mortgage. However, a fixed rate can make budgeting easier.
Do you want a repayment mortgage or interest-only?
When you are choosing a mortgage, you need to think about how you'll repay it. You have two options, repayment or interest-only.
"With an interest-only mortgage monthly payments only cover the interest and the amount borrowed has to be repaid at the end of the mortgage in a lump sum," says Boulger. "Less than 10% of new residential mortgages are interest-only, although most buy-to-let mortgages are, with the lump sum repayment expected from a sale of the property."
The more common option is a repayment mortgage. This means each of your monthly payments covers part of the interest and part of the repayment of the initial amount you borrowed.
"The monthly payments are calculated so that, assuming no interest rate change, the mortgage will be repaid by the end of the agreed term, usually between 20 and 35 years," says Boulger.
How to compare mortgages
When you've decided what type of mortgage you want, the type of interest rate you want and how you will repay it you are ready to check comparison websites for the best mortgage deals. When you are comparing make sure you look at:
- Interest rates – This will decide how much your mortgage costs you
- Fees – These can make a big difference to your overall costs
- Maximum Loan to Value – Are you putting down a big enough deposit to qualify for that particular mortgage?
Get help choosing a mortgage
Choosing a mortgage is a complex process and the difference between a good deal and a great deal can be tens of thousands of pounds of interest over the life of the deal. You might want to consider using a mortgage broker. Find an independent one at unbiased.co.uk or vouchedfor. Check that the broker is authorised to give mortgage advice at the Financial Services Register.
Source: https://www.goodhousekeeping.com/uk/consumer-advice/money/a33479221/compare-mortgages/
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