by Mark Johnston
The current economic position and the tightening of lending critiera of Banks and Building Societies has led borrowers to look at lot more closely at their current mortgage rates and whats on offer in the Uk mortgage market.This new found savvy in the market means that’s home owners and potential home buyers are looking to get the best deals and lowest rates. In order to do this they need to understand the deals on offer and what will help them get the best buy rates advertised by many lenders.
The best buy mortgage rates are often not the rates which borrowers end up with. The head line rates are the best possible terms baring in mind that a number of factors can continute to a borrower having to pay a highter rate. The first step in getting these rates is to understand what the factors are that will effect the rate that is offered to a potneial borrower.
One of the main things a lender will look at and use in determining what rate to offer a potential borrower is their credit score. If they have a great credit history then they are more likely to offer a better rate. Potenial borrowers with poor credit histories may well still be opffered a loan but the rate will be much higher. This is usually in correlation to the amount of risk a lender is taking.
Its worth remembering that having a spoteless credit history doesn’t always been a great credit score. Those that have never had any debt i.e. credit cards and loans may find it difficult to get a great rate as there is no evidence that they are good at making repayments. Sometimes the best rates are given to those who have debt but always pay on time and have never missed a repayment.
Banks often offers better rates to those borrowers who are going to live in the property that they are purchasing. These rates are know as “owner-occupant” mortgage rates. Those who are looking to invest in property so they can generate income by renting it out need to take out a buy to let mortgage. These types of mortgages are for buying a home as an investment and borrowers will usually need to pay a higher rate of interest as they tend to be more risky to the lenders.
One of the main things that borrowers have realised in recent years is that the size of deposit makes a massive impact of the rate that is offered. To get the very best mortgage rate a borrower needs a deposit of at least 25%. Some of the best buy mortgages have loan to value (LTV) rates of 60% so a deposit of 40% would be required.
Borrowers are usually shocked to learn that location can have a major impact on the mortgage rate. Some parts of the country are offered better mortgage rates than others.
The last but most obvious is the amount of money that a borrower is wanting makes a major impact on the rate that is offered. If a borrower is looking for a large loan, especially outside of what is usually offered, a higher rate is often applied as the risk is much greater.
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