Best Mortgage Loan

Securing finance for a new home is one of life’s biggest hurdles, yet there is no one-size-fits-all best mortgage loan on the market. The truth is that what works best for one person may not necessarily mean the best mortgage loan for another.

To find the best mortgage, work out the fees and charges associated with the loan, and whether you wish to have a ‘fixed’ or ‘variable’ interest rate. Likewise, you may prefer to make ‘interest-only’ or ‘principal and interest’ (P&I) repayments.

Fixed rate loan

With a fixed rate loan, the interest rate is set in concrete for an agreed term, usually from 1 to 5 years. While this scenario provides homeowners with a sense of fiscal security, there are restrictions with a fixed loan. For example, your lender may set limits on how many additional repayments you can make, which may prove less appealing if you’re aiming to clear your mortgage debts sooner rather than later. Likewise, if interest rates head south, you’ll be stuck paying a higher interest rate.

Variable rate loan

With a variable rate loan, the interest rate fluctuates up and down in tandem with a host of national and international factors such as changes to official interest rates. Variable rate loans usually offer the flexibility of making extra repayments, which is useful if you plan to pay off the mortgage fast.

Principal and Interest (P&I) repayments

With a P&I option, the repayments will be higher than with an interest-only loan, as you are paying the interest liability and the capital. This is a strategy worth considering if you plan to own your home outright.

Interest-only repayments

If you choose to make interest-only payments, you won’t chip away at the capital. As a consequence, repayments are lower than with a P&I loan. Generally speaking, interest only repayments are designed for investors, who aim to profit from the income and capital growth generated by a well-located, quality rental property.

Shopping around online is a great way to help you secure the best mortgage loan that suits your circumstances. For more information consult our best mortgage page for details.