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Which mortgage is right for you?

Mortgage providers are not quite as generous as they used to be, but there are still a baffling number of different mortgage products on the market. The secret of finding out which mortgage is perfect for you will involve calculating what you can afford and how long you want to be tied in to your deal.

A changing market

Since the banking crisis, mortgage lenders have been far more cautious about the kind of deals they offer. As the market readjusts to new economic realities, it can be difficult trying to discover which mortgage is right for you and your property purchase plans.

Affordability is a key issue. The best deals are available to those who can come up with the largest deposits. Although 95% and even 100% mortgages are still being offered by some lenders, the interest rates will be noticeably higher. Buyers who have a 20% or 30% deposit will find themselves in a strong position, with plenty of competitive deals available.

Until recently, borrowers often had a choice between repayment and interest loans, or interest-only. The latter offered substantially cheaper monthly repayments, but did not reduce the lump sum borrowed. Many lenders no longer offer this kind of loan, or make it prohibitive by charging high fees and imposing tough conditions.

One of the biggest decisions involves choosing between fixed rates of interest and tracker mortgages. Experts predict that interest rates may stay moribund for months and years to come, making fixed rates a less tempting option. Those who still want to be able to predict their payments reliably for two, three or five years should shop around for the best fixed deals.

Look out for hidden extras

When deciding on which mortgage is best for you, check the details of the fees that the lender charges for the mortgage. If you are borrowing a substantial amount, the fee may be relatively insignificant, but for smaller loans a fee of £1,000 will be more noticeable, especially if you renegotiate the deal every two years.

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