One final important thing to consider when choosing a mortgage is how often the lender calculates interest on the mortgage – knowing this could save you bucket loads of cash in the long run.
Daily – every payment you make is knocked off your debt immediately, which means you’ll pay much less interest over time. At one time, daily calculated interest was unheard of in the mortgage market, but increased competition saw it become a more and more commonplace feature of mortgages.
Monthly – make an overpayment at the start of the month and it won’t actually be taken off your debt until the end of the month. So leave any overpayments to as late in the month as possible (without missing your lender’s recalculation deadline, of course).
Yearly – make an overpayment at the start of the year and it won’tbe credited to your mortgage until the end of the year. Your lender will simply bank your overpayment and earn interest on it for the whole time – money that could be benefiting you. So don’t make any overpayments until as late in the year as possible (without missing your lender’s recalculation deadline).
In short, try and find a mortgage with daily repayable interest because you’ll be much better off in the long run. In such a crowded market, there may be some monthly or yearly calculated interest deals hanging around, so always check the mortgage small print to see how the interest is calculated before you sign up.