What Terms Change The Mortgage Interest Rates You Will Be Taking Out?

By FinanceGuru • Jan 24th, 2009 • Category: Mortgage

The mortgage interestrate that you are ultimately going to be charged by your bank will be a major factor in deciding which mortgage you will take out and also, which mortgage lender you will go to. The interest rate that you are going to be charged will dictate, for the next few years at least and maybe a lot longer, how much the mortgage is going to cost you. It will determine how much of your available monthly budget will be being spent on your mortgage and, therefore, how much of your hard earned income is available for you to spend on other bills and leisure time.

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But what factors will be affecting the mortgage rates that are available to you from the various lenders? For a start, the type of mortgage offer that you are interested in will dictate what the bank will offer to you. If you compare mortgage interest rates for fixed and standard rates, you would usually find banks offering special rates on their fixed rates making them less than their standard rates. This is the incentive for you to approach the lender and take out a mortgage. Later, when you have passed the initial phase of the mortgage and the incentive is approaching an end, your bank is hoping that you decide to stay loyal and take the easy option and not remortgage to a better deal within the bank, or worse still, a new lender.

The length of your selected incentive period will also dictate, in part, the actual mortgage interest rate that you are being charged. For example, you may get from your lender a very low fixed rate mortgage if you only fix it for 6 months, but a slightly higher interest rate if instead you are trying to fix the mortgage interest rates for 5 years. Tied into this, there may be a further lock in period once the incentive has ended, during which you are forced onto the lender’s standard variable rate mortgage product. This time, typically the longer the lock in period, the better the incentive rate that you will be offered at first to draw you in.

How much you are able to put down out of your own money as a deposit may also affect the mortgage rate that you are offered when you first take out your mortgage. For example, if you are unable to put down at least a minimum of a 25% deposit on your new home, then you might find that the interest rate jumps up by a quarter or even half of a percentage point as an insurance policy against you defaulting and owing them a lot of cash.

Trying to compare best mortgage rates on your own is a difficult task. It can be much easier with the assistance of a mortgage broker and much safer than reading around websites to find the best offers, and it might save you a small fortune if you can take advantage of some free expert advice.

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