Step 3 - Choosing the right mortgage

With SO many choices - selecting the right mortgage can be a real minefield.

In this article you'll learn:

  • The difference between a repayment and an interest only mortgage
  • An outline in to fixed or tracker rate mortgages
  • 4 reasons why you should give a mortgage broker a call

Finding the mortgage that best suits your needs can be a tricky task.  

Making sure you are in control of, and understand, your finances is key to choosing a mortgage that is right for you and your family for the next few years.  It may take a little while to get to this point, but the bottom line is that selecting the wrong mortgage, can cost you thousands - so it’s worth investing some time.

With so many options to choose from we have created some guidelines to help you decide which is going to be the best mortgage for you:

Have you considered which is the right mortgage for you?

Repayment or Interest Only?

  • With a repayment mortgage your monthly payments will be more but you will be paying off the amount you have borrowed, whereas with an interest only mortgage you only pay the interest and will not own your house at the end of the term.
  • Many of the lenders no-longer offer interest only mortgages at all and unless you have a separate plan to pay off your debt (such as; stocks and shares, Equity ISA’s, other properties) then a full repayment mortgage is the way forward.

Fixed or Variable Rate?

  • If you want to know EXACTLY what your mortgage payments are going to be over the next 2, 3, 4, or 5 years then a Fixed Rate is for you. However, if you feel that interest rates are going to remain pretty stable, or may drop, then a tracker rate could be your preferred choice.
  • Fixed rates generally cost more per month than the equivalent tracker rate but are the more popular choice as people prefer to know what their monthly payments are going to be.

Make sure you shop around

Just with most things in life, it’s best to shop around to make sure you’re getting the best deal, only when it comes to finding a mortgage - the savings can be thousands, instead of pounds.

A great place to start is our comparison tables (or anyone else for that matter) to get an idea of what type of mortgage you are going to want and how much it’s going to cost you each month.  Once you have a rough idea of what type of mortgage you would like it’s time to shop around:

Comparison Sites

  • Comparison sites are a great place to start when starting you search for a mortgage. They are great tools that allow you to search hundreds of mortgages in a very short space of time.
  • Always remember that they can be slightly misleading if you do not sort the results correctly. This is where a mortgage advisor can help.
  • They only give you a limited amount of criteria so be vigilant when checking if the mortgage you have chosen fits your own circumstances.

Go to your bank

  • Your bank can only offer you mortgage products from their own very limited range. It is therefore very unlikely that you will get the best rate when compared to all the others available by all the other lenders.

Talk to a mortgage advisor

  • Once you have an idea of a rate you like from our comparison table, contact a broker to see if he can beat it.
  • Make sure you find a ‘whole-of-market’ mortgage advisor as they are able to search thousands of mortgages in a matter of seconds.
  • Most mortgage advisors have access to exclusive rates that you may not be able to find using comparison tables.
  • A great mortgage advisor is a real asset as they know the lenders criteria inside out, will assess you as a potential borrower, and can tell you in a matter of minutes if you are likely to be accepted by your chosen bank or building society.
  • Check our Ultimate Guide to Using a Mortgage Advisor

Check the figures yourself

  • When you’re choosing the right mortgage it’s rarely best to simply ‘go for the lowest rate’ as they often carry hefty arrangements fee’s that make the mortgage more expensive over the 2, 3 or 5 year fixed or tracker rate period.
  • You need to carry out a Total-to-Pay cost. Our comparison tables can do this for you but many do not.
  • It’s worth taking your time to look at all the options available to you and carrying out a full cost comparison to see which mortgage is going to cost you the least over the next few years. Here are your options:
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Step 2: The lenders 'Affordability Calculators'

Most of the banks have an affordability calculator that you can use to get an accurate idea of how much they will lend you. For a list of links click the link below.

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Step 1: Complete a budget planner

Complete this simple form with all your income & outgoings and it will tell you what you have left at the end of each month for your new mortgage payments.

One lender can offer you more than another...

Don’t assume that all the banks and building societies will lend you roughly the same, they won’t.  In fact the differences can be VAST.  To illustrate this we have carried out the following comparisons: 

  • Mr & Mrs George
  • 2 x children
  • £45,000 - Combined Income
  • £50,000 deposit available
  • 25 Year mortgage term
  • £300 per month car loan
  • £186,763.00 - Santander
  • £168,500.00 - Nationwide
  • £161,500.00 - Woolwich
  • £144,900.00 - Halifax

*These figures are for illustrative purposes only and not to be taken as an accurate guide to what each of the lenders can offer.

As you can see, there is a £41,863 difference between what Santander and Halifax can lend Mr & Mrs George, based on their affordability it’s well worth doing your research! 

What a difference a car loan can make:

It was mentioned earlier in this article that credit commitments, such as a car loan, can have a big impact on what you will be able to borrow.  To highlight just how big an impact, have a look at the following figures:

Scenario 1 (no car loan):

  • Mr & Mrs George
  • 2 x children
  • £45,000 - Combined Income
  • £50,000 deposit available
  • No credit commitments
  • *£225,000 - Max loan available

Scenario 2 (with car loan):

  • Mr & Mrs George
  • 2 x children
  • £45,000 - Combined Income
  • £50,000 deposit available
  • £300 per month car loan
  • *£186,763 - Max loan available

The above illustrates that a £300 per month car loan reduces the amount that Mr & Mrs George can borrow by £38,237.00.  That’s a 17% drop!!!

Getting your budget wrong (or not doing a budget at all) can mean you’re not able to buy the home you and your partner have fallen in love with.  This can be deflating and wastes a whole lot of time, right at the stage when you should be most excited about your first purchase or moving home. 

How to get your mortgage offer in 10-days

Follow these simple steps & get your mortgage offer in record time

The Essential Mortgage Checklist

Here's a list of EVERYTHING you're going to need for your mortgage application

Get £41,863 more than you thought you could

Learn how you can a larger mortgage then you though was available

Read our guide on mortgage protection

Get yourself up-to-speed with a full guide to protecting your mortgage

Help!...I've had credit problems

If you've had credit problems in the past - fear not, you have options

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Would you like to speak to John about your mortgage?

When it comes to mortgages John knows his eggs.  His job is to review your individual needs and recommend the mortgage that going to cost you least over the coming years.

The 'Essential 6-Step Guide' to buying your first home:

Step 1 - Know your figures

If you don't know your figures, then you won't know how much you can afford.
Do you sums now and save time later


Step 2 - Get your credit file

Ensuring your have a clean credit file is a must when your buying your first home.
Get your free file now


Step 3 - Choose the right mortgage

Finding the right mortgage can be a minefield of options.
How to find your perfect mortgage


Step 4 -Find a great solicitor

There's a HUGE difference between a good one & a bad one.
How to choose the RIGHT one


Step 5 - Make an offer

Put yourself in the best buying position & blow the competition out of the water.
How to get your house...Fast


Step 6 - From offer to completion

Keep control of your home purchase & make sure you're in the know.
Get informed - Take control

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How to get your mortgage offered in 14-days!

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Broker vs Direct
Find out who can save you the most money

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The Price Cruncher
Get your new home for less money

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