Mortgages - buyer's guide
We teamed up with London & Country, the UK's leading fee free mortgage broker, to offer you expert advice on the right mortgage deal.
Your home or property may be repossessed if you do not keep up the payments on your mortgage.
How to find the right mortgage
Buying a home is one of the biggest financial decisions you will make in your life, so choosing the best mortgage is crucial. But in order to select the best mortgage to suit your current needs, you must understand the types of product available as well as the many factors that could influence your decision.
- Calculate how much you can afford to borrow by using online mortgage calculators and, when you become certain you want to buy, by asking your bank or building society what they would offer you – though remember they will only be able to offer their own products.
- Before you can find a mortgage that suits, you need to understand the types of mortgage available. A fixed-rate mortgage charges a set rate of interest for a fixed period of time, usually two, three or five years – this mortgage guarantees that you will make the same mortgage payment for the length of the fixed period, even if interest rates rise.
- A variable-rate mortgage means the rate you pay will rise or fall, though there are different types of variable product. Tracker mortgages follow the Bank of England base rate: for example, tracking the base rate plus 2 percentage points. But a discounted mortgage is linked to your lender's standard variable rate (SVR), which does not move up or down in line with the base rate, but at the lender's discretion. With a variable mortgage, you'll benefit should rates fall but could end up paying more if they rise.
- Look at comparison tables and when you find a mortgage you like, either approach the lender direct or ask a mortgage broker if they can help.
- When looking at mortgages, take into account the APR (annual percentage rate), which takes into account the cost of fees on top of the interest rate quoted, such as arrangement and valuation fees, thus giving a truer reflection of what you'll pay. Check when any fixed or discounted period will end, what rate the mortgage reverts to at this point and, crucially, how much it will cost if you wish to exit the mortgage before your deal expires.
- Check what loan-to-value (LTV) the mortgage requires. This is the maximum percentage of the property's purchase price that a lender will lend – it ultimately tells you how big a deposit you need. So a mortgage with a 75% LTV requires a 25% deposit.
- Look out for fees. You might think you've found the right mortgage, only to discover it has sky-high arrangement and valuation fees. Some mortgages have a lower interest but high fees, while others have a higher rate but lower fees – a mortgage advisor will be able to talk through which type betters suits your current needs as well as find the cheapest product.
- Check any exit fees or redemption penalties you might have to pay should you wish to exit a mortgage early. These can prove costly.