How to get Your Mortgage Paid For A Year

A quick look at a mortgage offer that we don’t like and how to get one that you will like. Santander is offering all its existing mortgage holders and anyone applying for one of its mortgages the chance to get their mortgage paid for a year.

However, a quick look at the small print reveals that this is unlikely to be as good a deal as the marketing spin suggests. If you are applying for the mortgage, you would have to pay a booking fee at the start of the process, so unless you thought it was the best rate on the market for your circumstances, you would waste a lot of money entering what is essentially a competition.

Santander’s 2.59 per cent tracker is not the lowest rate out there and has a booking fee of £995 which you would need to pay at the start of the application,and that fee would not be refunded if you decided against taking the loan.

HSBC on the other hand is something that we do like and is leading the field in discounted products, offering a two-year discounted variable rate at 2.39 per cent. You can only get this up to 60 per cent loan-to-value (LTV), and there is a booking fee of £999.

First Direct is also offering a 2.39 per cent variable rate, but this is a simple variable rate that goes the full term of the mortgage. So you are not tied into a deal.

This may be more appealing for some people too, as you can get it on 65 per cent LTV and the arrangement fee is just £499, less than half of the HSBC booking fee.

If you are looking for a fixed rate, then Melton Mowbray Building Society at 3.25 per cent fixed until March 31, 2012. Again this is on 75 per cent LTV, and the total upfront fees are also £998 – £599 arrangement fee, and £399 booking fee.

This is not a particularly flexible product though. You cannot take payment holidays, make underpayments, drawdown additional borrowing or make lump sum payments.

If you want to do any of these things, then the best deal for a two-year fixed rate is with First Direct with its 3.29 per cent fixed for two years on 75 per cent LTV. This has a booking fee and arrangement fee of £499 each – £998 in total.

You can offset savings against this product, which will reduce the interest you pay, and you can do a combination of a repayment and interest-only mortgage. This will help to reduce your monthly payments compared to a full repayment mortgage.

But you will not completely pay off your loan at the end of the term if you split the payments this way for the full term. You would need to have an investment running alongside the interest-only part to pay off that section of the mortgage when the term ends. Otherwise you could lose your home.

The best way to get the right deal for you is to speak to a mortgage broker who can go through what you need, and tell you the best type of mortgage to get for your circumstances.