How To Pick A Mortgage

If your lovely low fixed rate deal is about to run out, don't panic, follow our top tips.

Interest rates are set to rise again -- and with them millions of home loan payments. The Bank of England is set on curbing inflation by hitting us where it hurts with increased interest rates. But the thing is, we've had an astonishing four rises since last August -- so wouldn't you think that was enough?

Well apparently not. And the people we have to blame are those with fixed rate mortgages. A couple of years ago, when rates were low, millions of us took out fixed rate mortgages -- and I should know, I was one of them.

The mortgage my husband and I chose was set at a fantastic 4.39% APR, fixed for two years. Wonderful! And of course, as interest rates have risen, homeowners like us have been relatively unaffected, as our monthly mortgage payments have been unchanged.

Unfortunately, with so many of us out there on fixed rate deals being unaffected by the base rate rises, we've continued spending as normal on the high street. So as a result, inflation has been much less affected than it could have been, meaning that it is still above the government's target. Interest rates are to rise again, and so the cycle continues.

However, things may be about to change as so many of us chose to have 2 year fixed rate deals, many of which are about to end. If you consider my situation, for example, my lovely fixed rate of 4.39% is about to revert to my lender's Standard Variable rate of 7%. Eek!

So, say my mortgage was for £150k over 25 years, and I was currently paying £824 per month. Increasing the rate to 7% would mean my payments would go up by over a quarter (£236) to £1060 per month!

Well, regular readers will know that I'm none too keen on paying more than I need to for, well anything. I therefore need to remortgage, and fast.

How to pick a mortgage

First of all, you need to find a better deal. Ideally, you will give yourself about 3 months to do this (check your mortgage documentation to see when your discounted period expired) but if you don't have that long, start now!

Now, you can spend ages trawling the internet to find a cracking deal. But if like me you simply don't have the time, your best bet is to use a broker to do the hard work for you.
There are two key things to look for in a mortgage broker -- firstly, you must ensure he is "Whole of market", to ensure he checks all providers. Secondly, if you're like me, you won't be too keen on paying for the service.
Once you've found a broker that can do all of this, let him or her know your details, what you want and they'll come back to you with the best deals available, be it fixed, tracker, or discounted variable. What's more, many brokers have access to mortgage products that aren't available to individuals like you or me, so you could save even more.
Remember to ask if there is an offset facility, and if you can make overpayments.

If you can sign up for a new deal before your old discounted rate expires, you could save yourself an absolute fortune in extra mortgage payments, so it is well worth spending a bit of time now.

There are loads of mortgage brokers out there, but I'd urge you to at least take a look at The Motley Fool Mortgage Service. It's a 'whole of market' service and charges no fee.

So if your fixed rate is about to expire, don't let your lender take your extra cash -- find a cheaper mortgage.