Best Rate Mortgages - A Strange Concept
It may seem a slightly strange concept that something recognised as a ‘best rate’ mortgage should even exist. Surely, no provider would be prepared to admit to anything but the best rate of mortgage? And, why would any borrower wish to consider a non-best rate mortgage?
The term, ‘best rate’ is a bit of a misnomer and does not simply mean the cheapest possible mortgage. Importantly, one should consider that there are many different types of mortgages and, therefore, that the cost-effectiveness of a mortgage can also be measured in multiple different ways.
Different measurements for best rate mortgages
In order to make the most of the ‘best rate’ label that may be placed upon a given mortgage provider or product, it is vital that you understand the key proposals underpinning the mortgage in question. For example, a best rate on a fixed rate mortgage is likely to be related to the actual annual percentage rate that is offered, with the lowest available being the ‘best rate’.
Another very common measurement is to consider the best rate, all inclusively over a set period of time, such as five years. This will take into account all of the costs including compulsory insurances that the mortgage company levies on customers.
From a borrower’s point of view, it is the bottom line of what comes out of their bank account every month that is often the most important factor. Therefore, best rate can sometimes be worked out with reference to the initial monthly payments. With these types of best rate mortgages, it is particularly important to pay attention to what happens to the repayments once any discounted period ends. Although the mortgage may offer the best rate of repayment for a set period, it is unlikely that the rate after the initial period will remain the best possible option.
Any borrower who is following the cheapest monthly repayment route should consider their position at least annually and certainly before any rate changes are seen in their current mortgage.
Entitlement to best rate mortgages
Unfortunately, best rate mortgages are often advertised as a way of attracting customers but, in practice, can actually prove very difficult to obtain. It is a mistake, even if you are a reasonably ‘good’ borrower, to assume that you will be entitled to the best rate as advertised by the various lenders.
A borrower who has adverse issues on their record such as county court judgements or a generally poor credit rating will almost never be entitled to the best rate mortgage and these advertised offers should largely be ignored. Remember ‘best rate’ to an individual should actually be the best rate, given their circumstances.
Typically, the discounted or best rates will be available to those who are in a solid employment situation with a regular income amply covering the repayments, with a good credit rating and looking to borrow less than 75 percent of the value of the property.