Mortgage Basics 1
Taking a mortgage out will be the biggest financial commitment you make in your life. Previously, people would pay a visit to their bank and undergo an interview with the manager to arrange the details of their mortgage loan but with today's ever competitive market, there are now nearly 150 different lenders offering over 5,000 different types of mortgages. So instead of a simple trip down to the bank, you need to shop around on various price comparison sites and visit a couple of banks.
The benefits of shopping around could enable you to save hundreds of pounds a month in repayments.
The fundamentals -
A mortgage is basically where a lender borrows you a lot of money in order for you to pay for a property which is used as collateral against the loan. This means the lender can take the property off you if you fail to keep up with the repayments.
To draw you in, the lender will offer an attractive deal which only lasts for a certain period of time which will vary depending on the mortgage. Once the deal period is over, you will be put on a standard variable rate (SVR) which is normally a lot higher than the original deal. People tend to change their mortgage deal a lot to avoid paying the high SVRs, even though some SVRs can be lower than some initial deals.
The majority of mortgage rates are based on the Bank of England base rate, which is a rough indication of the cost of borrowing in the economy. Although both rates do not fluctuate exactly the same, their trends are similar.
Tracker deals are set either up or down a few points exactly, so people who have a tracker deal will pay more attention to the Bank of England base rate.
