Why Is It Important To Get The Best Rate?
The mortgage is a long-term debt, and therefore a small change in the mortgage rate has a large impact on the mortgage repayment rate and the borrowers’ monthly expenses. Therefore, an accurate assessment of the mortgage rate and choosing the mortgage that has the most appropriate rate is very important. So finding a mortgage at the lowest rate is worth the time.
The mortgage rate depends on the borrowers’ financial situation and the property they intend to buy. However, borrowers are looking for lower rates and more reasonable monthly payments to compare different options. The most important factors affecting the mortgage rate are credit score, past debts, deposits, and the debt-to-income ratio.
So it does not seem easy to search the market and find the best rate and lender that offers the right rate to competitors. However, the lowest interest rate does not necessarily mean the best interest rate, as lenders may consider other unfavourable conditions for mortgages. But with good credit, the borrowers might find exactly what they need.
This article addresses the factors that influence the best mortgage rates and what steps borrowers must take to get the best rates.
How Is The Mortgage Rate Determined?
Economic conditions, borrowers’ conditions and lenders’ conditions are the three factors that determine the mortgage rate. If you are currently looking for self build mortgages, you need to consider these three factors to get the best mortgage.
However, borrowers can not have much of an impact on these factors unless they have a few months to spare. For example, economic conditions change, borrowers’ credit improves, or finding a suitable lender. But borrowers can always talk to multiple lenders and increase their chances of finding a lower interest rate mortgage.
Below, the factors are described in detail and how they determine the mortgage rate is analysed.
- Economic conditions
The economic strength determines the rate of mortgages, and the economy is a major factor in determining mortgage rates. When it booms, the mortgage rate is usually high, and when the economy has a problem, the mortgage rates are usually low, and these fluctuations change daily. An unexpected economic analysis can raise the interest rate, while a report indicating poor economic conditions can lower the interest rate. It may be better for the borrowers to wait for the economic situation to improve or rush to buy the property. Like the pandemic, the mortgage market changed completely, and lenders took different terms.
- The type of lender
Lenders offer different rates to customers depending on the type of mortgage, flexibility and risk. That’s why comparing the rates of two or more lenders is so important. On the other hand, different lenders classify borrowers into different categories and offer the best deals for the most reputable borrowers. Therefore, if the borrowers’ credit score is low and they submit their application to a lender who works with high-credit borrowers, their application will most likely be rejected. On the other hand, if the borrowers’ credit score is high and applies to a lender with low scores, they will most likely not be offered a mortgage at a favourable rate.
- Individual factors
Individual factors also determine the mortgage rate and determine its level. Here are the individual factors that determine the mortgage rate and recommendations to improve the financial condition of borrowers and increase their chances of getting the best mortgage rate.
- Credit Score – Borrowers’ credit record in managing past debts is the best indicator of new borrowers’ debt management. However, different lenders consider different coefficients to determine the acceptable credit score of borrowers. But in general, the higher the credit score of borrowers, the lower the rate.
- The effect of ratings on credit score
- Use credit cards wisely
- Close unused credit accounts
- Payment of arrears
- Deposit – The higher the deposit, the less risk the lender will incur. The loan to value (LTV) index is one of the important indicators in this regard. Lenders set the deposit rate at 5 to 20 per cent. This means that the mortgage amount allocated will be equal to 80 to 95% of the property’s value. The higher the deposit, the lower the lender’s rate.
- Debt to Income (DTI) Ratio – Some borrowers need mortgages to consolidate their monthly payments or settle their small mortgages. The lower the ratio, the lower the lenders rate.
Ways for Getting the Best Mortgage Rate
There are several ways to get the best mortgage rate, including:
- Market Search – This method takes a lot of time and money, and borrowers have to choose the best option from the various products available in the market and different lenders.
- Borrowers will look at different products on the market and find that different lenders offer them different rates. This is because lenders evaluate borrowers according to their procedures. Each lender’s formula may classify the borrowers as high-risk or low-risk borrowers and determine their rates accordingly.
- Lender area of activity – The work areas and occupations the lender operates can affect their proposed rate. If lenders are familiar with the borrowers’ specialists, they will likely find more affordable rates.
- Using the advice of a specialist and experienced broker – Using the advice of a remortgage broker, while saving time and money, the lenders will provide different options to borrowers, and they can choose the best option from among the various options. Among the most important advantages of using brokers are the following:
- access to a variety of products
- Get advice in different stages of getting a mortgage
- More flexibility in choosing the type of mortgage
- Save time
- Cost savings
The Importance of Using SWG Mortgages Advisors
With the experience of handling several cases in a month, SWG Mortgages specialist advisors are well aware of the factors that affect the mortgage rate and provide the necessary information to borrowers. While examining macroeconomic variables, SWG Mortgages advisors demand rates and conditions from lenders that match their fields of activity and the goals they need.
SWG Mortgages experienced advisors estimate mortgage terms to meet the borrowers ‘financial needs, as a small change in the mortgage rate over a long repayment period can have far-reaching effects.
SWG Mortgages specialist advisors carefully assess the economic situation, lenders’ behaviour and financial condition and help borrowers find the best options according to the borrowers’ needs.