6 Factors to Compare Across Mortgage Offers
Mortgage comparison is dominated by the headline rate, which is only part of what the borrowing costs.
1. The components
The interest rate, and whether it is fixed, tracking a base rate, or variable at the lender's discretion.
The fixed or introductory period, and what the rate reverts to afterwards.
Arrangement, booking and valuation fees.
Whether fees are paid upfront or added to the loan, in which case interest accrues on them.
Early repayment charges during the deal period.
2. Comparing properly
Calculate the total cost over the deal period: monthly payments plus all fees.
On a smaller loan, a large arrangement fee outweighs a modest rate reduction; on a large loan the reverse frequently holds.
Most lenders publish an overall cost measure designed for comparison, which assumes you stay for the full term — useful as a check and rarely how people actually behave.
3. Fixed against variable
A fixed rate buys certainty for a period, at a price.
A tracker moves with an underlying rate, which can fall and rise.
The right choice depends on how much payment certainty you need rather than on predicting rates, which nobody does reliably.
4. The end of the deal period
Reverting to a lender's standard variable rate is usually expensive, and it happens automatically.
Diarise the end date six months ahead, since remortgaging takes time and offers can be secured in advance.
A product transfer with the existing lender is usually simpler and worth comparing against the wider market rather than accepting.
5. Overpayments
Most deals allow overpayment up to a percentage each year without penalty.
Overpaying early in a term has disproportionate effect, since interest is front-loaded.
Check whether overpayments reduce the term or the monthly payment, since the difference is substantial and is frequently a choice.
6. Advice
A whole-of-market broker sees deals not available direct, and fee structures vary.
Final Thoughts
Mortgage comparison is dominated by the headline rate, which is only part of the cost. Calculate the total over the deal period including fees, and diarise the end date six months ahead.
General information only; this is not financial advice and mortgage rules vary by jurisdiction.
Author: This article is general information only and does not constitute professional advice. Circumstances vary, and you should consult a qualified professional before making decisions based on this content.
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