Selecting A Mortgage Product | Which Mortgage Is Best?

Podcast Hosts:

Gemma – Host

Ifthiika (Ifthi) – Accountant and Mortgage Broker

Introduction

Gemma:

Today, we discuss selecting a mortgage product.

We’ll cover why price comparison sites may differ, why the mortgage you select might not be the one you get, and key factors to consider.

Q&A Discussion

Q1: Why Use Price Comparison Websites for Mortgages?

Ifthi:

They are a good starting point to see indicative rates.

Limitation: They do not consider lender-specific criteria.

Example: If you have a 10% deposit, the site may show certain products—but not everyone qualifies.

Always check details beyond the headline rate.

Q2: Why Do Some Comparison Sites Show Cheaper Rates?

Ifthi:

Technically, rates should be the same across fair comparison sites.

Differences may appear due to:

• Questions you answer on the site
• Fees included or excluded in the displayed product

Important: Check for product fees, valuation fees, early repayment charges, etc.

Gemma:

Adding fees to the mortgage increases interest paid over the term.

Best practice: pay fees upfront if possible.

Q3: Repayment vs Interest-Only Mortgages

Ifthi:

Repayment mortgage: Pay capital + interest; mortgage fully repaid after term. Recommended for most residential buyers.

Interest-only mortgage: Pay only interest. Rarely recommended; only suitable if you have a credible repayment vehicle.

On comparison sites, interest-only may show cheaper monthly payments, but you’re not reducing the loan balance.

Q4: Fixed vs Variable Mortgages

Ifthi:

Fixed rate: Monthly payments stay the same during the term. Ideal when interest rates are low or expected to rise.

Variable rate: Payments can change based on market rates. Useful if rates are expected to fall.

Q5: Types of Variable Mortgages

Ifthi:

Tracker: Linked to Bank of England base rate (e.g., base + 1%).

Standard Variable Rate (SVR): Default rate after a deal ends, around 3.5% for high street banks.

Discounted Rate: Discount on SVR (e.g., 2% off 3.5% = 1.5%). Rate varies with SVR changes.

Gemma:

Comparison sites may not reflect break costs or other features.

Q6: How Does Mortgage Term Length Affect the Quote?

Ifthi:

Interest rate may not differ much between 25-year vs 30-year mortgages.

Longer term → lower monthly payments, but more total interest.

Recommendation: choose the shortest affordable term to reduce interest.

Gemma:

Sometimes extending the term is necessary for affordability but reduce it later if possible.

Q7: Ideal Deal Period for Mortgages

Ifthi:

Shorter deals often have better rates.

Example: 2-year deal cheaper than 5-year, but after the term, a new rate applies.

Consider your plans: short-term deals offer flexibility, long-term deals may incur early repayment charges.

Q8: Why Might I Not Get the Mortgage I Found Online?

Ifthi:

Depends on lender-specific affordability criteria.

Some lenders give 5x income, others 4.25x.

Online quotes don’t consider your full financial circumstances.

Gemma:

Even a seemingly low rate may be unavailable if affordability criteria are not met.

Always speak to an advisor to get an accurate assessment.

Q9: Advantages of Using an Advisor

Ifthi:

We combine mortgage advice with accountancy expertise.

Can assess:

• Cheapest rate based on your finances
• Tax considerations (e.g., offset mortgages)

Comparison sites don’t account for your full financial picture.

Q10: What to Do When Your Deal Ends

Ifthi:

Without action, you move to SVR, usually less favorable.

Recommendation: start reviewing 6 months before deal ends.

Get advice on remortgaging options and preparation.

Gemma:

Comparison sites are helpful for estimates but professional guidance is essential.

Closing Remarks

Gemma:

Always consult an advisor; these points may not apply to everyone.

Our company offers accountancy and mortgage advice, helping clients understand both finance and tax implications.

Reminder: A mortgage is secured against your home or property; failure to keep up repayments may lead to repossession.