Comparing Mortgages

comparing protection | savings & investment | pensions | mortgage products | intro

Comparing products & providers

	The main providers are:
		building societies
		banks
		insurance companies

Different mortgage types

• Redemption Penalties are additional fees charged on repayment of the loan, and will depend on the interest option:-

  Variable Rate - generally no penalty. Fixed Rate - will depend on the initial term, the longer the term, the higher the penalty, perhaps up to six months' interest. Deferred Interest - potentially a higher rate (because of the interest forgone) plus full repayment of the accumulated deferred interest. Any penalty imposed will be a one off payment by the borrower

• Flexibility of payment term may be a useful short-term safety net when income is reduced, as it will be appreciated that the term can be stretched only so far. The option has little if any value where the repayment vehicle is a pension plan.

• Arrangement Fees need to be clarified before any commitment is made, as some may be refundable up to a certain stage, others may not. Additionally, although it may seem attractive to 'lose' the fee by adding it to the loan, in the long run it could be expensive because of the interest charged over the loan period.

• Overall Annual Percentage Rate (APR), as defined by the calculation laid down by law should be easy to compare between providers. Calculations should be checked, however, to make sure they are correct.

Comparing different providers

Annual Payment Reviews

• Annual payment reviews are important planning dates, as these are the dates at which any changes of interest rate take place. If the date is after a reduction in the rate, there may be a short-term 'loss' and vice versa. It may be worth investigating the advantages of switching to the 'immediate' change system; any charges imposed for the switch may make the exercise too expensive.

Portability

• Portability or the potential to transfer an existing loan to a new house for the remainder of the existing term, could save money in rearrangement fees. It could also save expense where an existing loan is at a low fixed rate of interest.

Quality of Service

• Quality of service is of particular importance in terms of decision making and processing the paperwork. This also includes how flexible the lender's systems are in being able to accommodate less favourable surveys than expected, for example. Similarly, staff attitude is important e.g. are they helpful in terms of suggesting solutions to problems, or do they merely fulfil their basic processing roles.

Ancillary products

• Ancillary products may be compulsory with some providers, especially where the loan is based on some sort of special deal. Such products may be household insurance, or additional personal insurances such as income protection insurance (IPI).

Further Advances

• Further advances and ease of availability may be a consideration, especially where the property is to be subject to a programme of renovation or alteration. Planning may be difficult, because markets change, but it may be possible to arrange for provisional undertakings to provide additional advances at the outset of the loan. It may be necessary to ensure completion of a project.

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.