Here’s our step-by-step guide to getting through the mortgage maze and ending up at the best deal for you.
1. Understand your budget
Since new rules known as the Mortgage Market Review (MMR) were introduced in 2014, any lender will go through your monthly budget with a fine-toothed comb to work out what it thinks you can afford in monthly mortgage payments. So get ahead of the game by doing these sums first.
Draw up a list of all your monthly expenses (which should include everything from food shopping to the kids’ piano lessons) and see what’s left over. Remember this is the MAXIMUM you can afford – it’s not a target and it’s always better to have money left over to cover unexpected costs.
2. Decide which type of mortgage you want
Now, decide whether you want a mortgage with a fixed or variable rate. With a fixed rate mortgage, your monthly repayments will stay the same for the length of the deal, making it easy to budget.
With a variable rate mortgage your monthly repayments can vary according what happens to interest rates.
Decide whether you want a mortgage with a fixed or variable rate...
Mortgage lenders consider potential interest rate rises when calculating your affordability – but still, if you are worried about managing an increase in repayments, choose a fixed rate deal.
3. Compare the whole mortgage deal – not just the headline rate
Now it’s time to look at some mortgage comparison tables and compare deals. But, don’t simply plump for the mortgage with the cheapest rate that features at the top. Why? Because these ‘headline’ interest rates don’t factor in fees – such as arrangement, booking or completion fees.
You’ll need to work out the overall cost of each mortgage to get a true like-for-like comparison – like this:
-Find out what your monthly mortgage payments for the rate and loan size will be using a mortgage calculator
-Multiply this figure by the number of months the deal lasts for (say, 24 or 36)
-Add the fee(s) on top
-This gives you the true cost of the deal over the term
-Repeat for the next best comparable deals
It’s also worth familiarising yourself with the early repayment charges (ERCs) in case you should need to get out of your deal early. You can view a full breakdown of mortgage fees and what they mean here.
4. Speak to a mortgage broker
If you’re still feeling a little out of your depth, speak to a mortgage broker who will be able to advise you on which deals suit your needs best. But don’t pay for it.
You can contact our mortgage partner, London & Country, for free, independent advice on 0800 073 1943 from a landline for free or 0333 123 1943 from a mobile at local rate, seven days a week. There’s no strings attached if you decide not to proceed.
5. Boost your chances of getting accepted
Once you’ve decided what mortgage you want, the last thing you need is to be turned down. The good news is, there are some really tangible things you can do to boost the chances of getting accepted:
-Save the biggest deposit you can
-Check your credit score is up to scratch – you can order a copy of yours here
-Get on the electoral roll and check your address is correct
-Get ready to roll by gathering together your paperwork, including bank statements and payslips for the past three months, ID (such as your passport), proof of address (such as a utility bill), P60s for the last two years and documents to prove any other income you receive (such as Child Benefit).
It also pays to be careful about which property you buy as lenders can often shy away from flats above commercial premises (such as shops and restaurants), leasehold properties with a short lease, and old or unusual homes built with non-standard construction materials such as concrete or steel.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.