Looking to choose the right mortgage?

Follow our step-by-step guide to finding the best option for you

Choosing the right mortgage is a process that’s worth spending some time over, as decisions made now will affect your finances for years to come. We’ve provided the steps you need to consider to find an affordable mortgage that’s right for you.

Establish how much you can borrow

Mortgage providers have strict rules controlling how much they can lend you, and they’re required to check you’ll be able to afford the repayments, now and in the future.

Different mortgage providers have slightly different criteria and therefore one might lend you more or less than others. But as a general guide, if you’re buying alone, you can typically borrow up to five times your annual income. If you’re buying with another person, you can typically borrow up to four times your joint income.

You can use an online calculator, or apply for a mortgage in principle, to see how much a mortgage provider will lend you.

Decide how much you can afford

You may not necessarily want to borrow the maximum a mortgage provider is prepared to lend you.

Take a look at your current monthly budget, and your ideal monthly budget, including how much you’d like to spend on essentials and luxuries, and how much you’d like to save for the future. A helpful rule is that your mortgage repayments should be no more than 30% of your total income.

Calculate your deposit

Look at your total savings and decide how much you can afford to put towards your property. Remember that you’ll still need some savings in the future, including cash savings to cover at least 3-6 months’ worth of expenses in case of an emergency. And you’ll need some money to cover the other costs of buying a home beyond the deposit payment. There are solicitors’ fees, survey fees, and mortgage fees to pay, which can add up to thousands of pounds.

A bigger deposit (in comparison to the total value of the property you intend to buy) makes better mortgage rates accessible to you. 

Look into government schemes

If your deposit amount is lower than you’d like, first time buyers ay be eligible for government schemes that can help.

One example is a Help to Buy equity loan, which is a low-interest, low-fee loan that you can put towards your deposit when applying for a mortgage. Another option is Shared Ownership, which allows you to buy a share in some newly built properties, while renting the remaining portion of that property from a local authority.

See what introductory rates are available

Most mortgages have a ‘standard variable rate’ (SVR) but many also have a ‘fixed rate’ or ‘tracker rate’ offered for an introductory period.

A fixed rate means that your mortgage repayments won’t go up or down within the introductory period (usually between one and five years), so you’ll have the security of knowing exactly how much you’ll pay each month.

A tracker rate may go up or down but will only do so to follow the Bank of England interest rate. This is different from an SVR, which can go up or down by as much as your mortgage provider decides.

Compare mortgage fees

You might think that you can tell which mortgage will cost you more just by comparing the interest rates, but unfortunately that’s not the case. Some mortgages offering the lowest rates balance this out by charging higher fees upfront, which could cost you more in total.

As well as the initial fees (which can include arrangement fees, booking fees, valuation fees, transaction fees, and account fees), you should look at any penalties you may pay later. Some mortgages have high penalties for early exit, for example, if you sell your home before the end of the introductory period. Some will charge a penalty for overpayments, which could mean it takes you longer to pay back the loan.

Speak to a mortgage adviser

If you’re finding it difficult to accurately compare the costs of different mortgages, or you’d like to know about options that aren’t necessarily advertised directly to borrowers, its important to speak to a professional mortgage advisers. They can compare every option available and recommend the right one for you based on your unique situation.

All Rights Reserved. Information contained in this article and on our website does not constitute advice and is provided for information purposes only. Recipients should not act upon it, but should seek professional advice relevant to their own situation.