Five factors to consider beyond the mortgage rate
June 2023
Five factors to consider beyond the mortgage rate
June 2024
When it comes to securing a mortgage, the hunt for the best rate often takes centre stage. But true value extends beyond interest rates. There are other factors to consider when choosing your next mortgage, and these could determine whether you switch lenders or stick with your current mortgage provider through a product transfer. In this article, we outline the key aspects that can help you reach a well-informed mortgage decision. Alternatively, you can speak to your broker who can support you with the process.
Budgeting and flexibility
Consider the flexibility that a lender or mortgage offers, so it doesn’t put limits on your plans.
One of the first decisions you’ll need to make is whether you want a fixed or variable rate mortgage. A fixed rate mortgage will secure your monthly repayments for an agreed term, so you’ll know exactly what you’ll need to pay from month to month. With a variable rate product your monthly repayment could change, for example if the Bank of England raises or lowers the base interest rate. However, these products do offer greater flexibility, as you can switch to another mortgage deal without any financial penalty in the form of an Early Repayment Charge (ERC) or having to wait until a fixed term ends.
If you opt for a fixed rate mortgage, you’ll also need to think about how long to fix your mortgage for. A five year mortgage provides certainty that repayments will stay the same for longer, but with a two year product you change your mortgage deal sooner. This could be beneficial if mortgage rates fall, allowing you to lock into a lower rate without paying ERCs
Check whether the mortgage provider you’re choosing allows for overpayments too. Making additional payments on your mortgage can reduce the amount of interest you’ll pay over the full term of your loan. Some lenders will allow you to pay up to a certain amount before any ERCs come into effect. At Coventry Building Society, borrowers with a fixed rate mortgage can typically make overpayments up to 10% of the capital per year without facing any ERCs, and you can find out more about this process here.
Speed
We’re often told to shop around for the best deal, no matter what we’re buying. This is sometimes true of the mortgage market too, but switching lenders has its own implications. If you remortgage, you’ll need to fill out a full application, provide evidence of income, such as bank statements and payslips, and undertake a credit check.
Product transfers, where you stay with your lender but transfer to a new mortgage deal, can be far quicker. If you are keeping the same type of mortgage by transferring to a new rate and not making any changes to your mortgage arrangement, the process can be completed online at Coventry Building Society in as little as 15 minutes. If you have a mortgage with us, you'll be able to choose one of our existing member products where you'll be offered rates that are as good as or better than the equivalent products offered to new members.
Additional Fees
Be sure to check whether the mortgage has any additional fees. Some will come with a product fee, and the average fee according to Moneyfacts is £1,1121.
If you’ve found a mortgage with a lower rate, check how much this fee is. Compare the mortgage with other products that have a higher rate but lower or no product fees, as you could end up paying more. There’s also the option to add the product fee to your mortgage rather than paying upfront. Just remember you’ll be charged interest on this additional amount.
If you’re switching lenders to get a lower rate, be aware of the potential extra costs this can bring too. Solicitor fees and property valuation costs can really add up, so factor them in when you’re deciding your next steps. At Coventry Building Society, some of our products will include a product fee, but we won’t charge legal or valuation fees with a product transfer.
Service
No matter what decision you make, your lender should offer outstanding service. This means being able to speak with a real person whenever you need help, having your options explained clearly and being treated with respect. At Coventry Building Society, we pride ourselves on the service we offer to our members. In 2023, we were recognised with the Moneyfacts Best Service from a Mortgage Provider award.
If you’re happy with your current lender’s level of service, staying with them by doing a product transfer might be sensible. If you’re tempted to switch to a lender that offers a better rate, make sure you first read reviews from existing customers to get an idea of the service they provide.
Purpose
For many borrowers, there are other factors that matter more than the cost of their mortgage. They want to know they’re partnering with a responsible organisation.
When you borrow with Coventry Building Society, you’re choosing a mutual which puts its members at the heart of everything we do, and which seeks to be a force for good. As the UK’s first B Corp certified building society, we’re committed to doing our best for our members, our community, and the planet.
Whether you’re searching for your first mortgage or getting ready to move onto a new product, reach out to our team of experts to understand what really matters and for help with making the right decision.
Budgeting and flexibility
Consider the flexibility that a lender or mortgage offers, so it doesn’t put limits on your plans.
One of the first decisions you’ll need to make is whether you want a fixed or variable rate mortgage. A fixed rate mortgage will secure your monthly repayments for an agreed term, so you’ll know exactly what you’ll need to pay from month to month.
With a variable rate product your monthly repayment could change, for example if the Bank of England raises or lowers the base interest rate. However, these products do offer greater flexibility, as you can switch to another mortgage deal without any financial penalty in the form of an Early Repayment Charge (ERC) or having to wait until a fixed term ends.
If you opt for a fixed rate mortgage, you’ll also need to think about how long to fix your mortgage for. A five year mortgage provides certainty that repayments will stay the same for longer, but with a two year product you change your mortgage deal sooner. This could be beneficial if mortgage rates fall, allowing you to lock into a lower rate without paying ERCs.
Check whether the mortgage provider you’re choosing allows for overpayments too. Making additional payments on your mortgage can reduce the amount of interest you’ll pay over the full term of your loan. Some lenders will allow you to pay up to a certain amount before any ERCs come into effect. At Coventry Building Society, borrowers with a fixed rate mortgage can typically make overpayments up to 10% of the capital per year without facing any ERCs, and you can find out more about this process here.
Speed
We’re often told to shop around for the best deal, no matter what we’re buying. This is sometimes true of the mortgage market too, but switching lenders has its own implications. If you remortgage, you’ll need to fill out a full application, provide evidence of income, such as bank statements and payslips, and undertake a credit check.
Product transfers, where you stay with your lender but transfer to a new mortgage deal, can be far quicker. If you are keeping the same type of mortgage by transferring to a new rate and not making any changes to your mortgage arrangement, the process can be completed online at Coventry Building Society in as little as 15 minutes. If you have a mortgage with us, you'll be able to choose one of our existing member products where you'll be offered rates that are as good as or better than the equivalent products offered to new members.
Additional Fees
Be sure to check whether the mortgage has any additional fees. Some will come with a product fee, and the average fee according to Moneyfacts is £1,1121.
If you’ve found a mortgage with a lower rate, check how much this fee is. Compare the mortgage with other products that have a higher rate but lower or no product fees, as you could end up paying more. There’s also the option to add the product fee to your mortgage rather than paying upfront. Just remember you’ll be charged interest on this additional amount.
If you’re switching lenders to get a lower rate, be aware of the potential extra costs this can bring too. Solicitor fees and property valuation costs can really add up, so factor them in when you’re deciding your next steps. At Coventry Building Society, some of our products will include a product fee, but we won’t charge legal or valuation fees with a product transfer.
Service
No matter what decision you make, your lender should offer outstanding service. This means being able to speak with a real person whenever you need help, having your options explained clearly and being treated with respect. At Coventry Building Society, we pride ourselves on the service we offer to our members. In 2023, we were recognised with the Moneyfacts Best Service from a Mortgage Provider award.
If you’re happy with your current lender’s level of service, staying with them by doing a product transfer might be sensible. If you’re tempted to switch to a lender that offers a better rate, make sure you first read reviews from existing customers to get an idea of the service they provide.
Purpose
For many borrowers, there are other factors that matter more than the cost of their mortgage. They want to know they’re partnering with a responsible organisation.
When you borrow with Coventry Building Society, you’re choosing a mutual which puts its members at the heart of everything we do, and which seeks to be a force for good. As the UK’s first B Corp certified building society, we’re committed to doing our best for our members, our community, and the planet.
Whether you’re searching for your first mortgage or getting ready to move onto a new product, reach out to our team of experts to understand what really matters and for help with making the right decision.
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