Tips for getting a good mortgage deal

30 Jun 2021

by Helen Thring

For most people, a mortgage is the largest financial commitment they will ever make, so it’s understandable that buyers want to secure the best mortgage deals possible. However, with hundreds of mortgage deals available, it’s easy to feel overwhelmed by the variety of options. Whether you’re a first-time buyer or someone looking to re-mortgage, navigating the mortgage market can be complex.

Here are some key considerations that will help you make an informed decision and get the best deal for your situation.

What to Consider

Interest Rates One of the most significant factors affecting your mortgage deal is the interest rate. Mortgage rates are currently low, but they can rise over time, which will directly impact your monthly payments. Choosing between a fixed-rate or variable-rate mortgage will be one of your first decisions. A fixed-rate mortgage locks in the interest rate for a set number of years (usually between 2 and 10 years), offering security against rising rates. A variable-rate mortgage can fluctuate based on the lender’s standard variable rate (SVR) or the Bank of England’s base rate. While variable rate mortgages might initially be lower, they come with the risk of rates increasing during the mortgage term.

Mortgage Term Most mortgages run for 25 years, but there are options for longer terms, some stretching up to 40 years. A longer term may result in lower monthly payments, but it also means you’ll pay more interest over time. Shorter terms can save you money in the long run but will require higher monthly payments. Carefully consider your financial situation and future plans when selecting the length of your new mortgage deal.

Mortgage Fees It’s important to be aware that mortgage lenders often charge additional fees, which can add to the overall cost of your mortgage deal. These can include:

• Valuation fees: Charged to assess the value of the property.
• Arrangement fees: These are charged for setting up the mortgage and can vary greatly between mortgage lenders.
• Early repayment fees: If you pay off your mortgage early, some lenders charge a penalty.
• Missed payment fees: If you miss a payment, you could be charged a late fee.

Not every mortgage will come with all of these charges, but it’s essential to understand the fees associated with each mortgage deal to avoid unexpected costs.

Interest-Only vs. Repayment Mortgage Another important decision is whether to opt for an interest-only mortgage or a repayment mortgage. With a repayment mortgage, you repay both the interest and the capital over the term, meaning the entire loan is paid off by the end of the mortgage term. An interest-only mortgage allows you to pay only the interest each month, which means your monthly payments are lower, but at the end of the mortgage term, you will still owe the full loan amount. Interest-only mortgage deals were more common before the financial crash of 2008 but are now typically available to those with substantial equity or larger deposits.

Where to Start

Given the complexity of the mortgage process and the financial commitment involved, most people seek professional advice before applying for a mortgage. Here are two primary options for advice:

Talking to Your Bank or Building Society

If you already have a relationship with a bank or building society, this might seem like a convenient option. These institutions can offer tailored advice based on your financial history and recommend products they provide. However, one limitation of this approach is that banks and building societies will only offer their own mortgage deals, which means you might miss out on the best mortgage deals available from other lenders.

Consulting an Independent Mortgage Adviser

To get a broader view of the mortgage market, many homebuyers opt for an independent mortgage adviser. An independent adviser can compare deals from multiple lenders, ensuring you get access to the most competitive mortgage rates and terms. This is especially useful for those with specific needs or financial circumstances that don’t fit the standard offerings from a bank.

When choosing an independent mortgage adviser, make sure you select an experienced adviser with a good track record. Ask friends, family, or colleagues for recommendations, or contact us here at Duncan Yeardley for advice. Be aware that some advisers charge upfront fees, while others receive commission from mortgage lenders, so it’s important to understand how your adviser is compensated before you proceed.

Other Mortgage Tips

Re-Mortgaging If you’re considering re-mortgaging your home, it’s still worth seeking advice, even if you feel confident in the process. The mortgage market has changed significantly due to recent economic events, including the impact of Covid-19. Lenders have adjusted their lending criteria, and mortgage rates have fluctuated. An experienced mortgage adviser can help you navigate these changes and ensure you’re getting the best deal for your re-mortgage.

Get Your Paperwork in Order When applying for a mortgage, you’ll need to provide documentation to support your application.

Lenders typically require:

• Three months of bank statements
• Three months of payslips
• Proof of ID (such as a passport or driver’s licence)
• A P60 if you are employed, or copies of your accounts if you are self-employed

Having these documents ready can speed up the application process and help ensure there are no delays with your mortgage deal.

Be Cautious with Credit Checks Avoid making multiple mortgage applications at the same time, as this can negatively affect your credit rating. A single mortgage application won’t damage your credit, but multiple ‘hard searches’ – in which a lender takes a deep dive into your credit history – can reduce your score. The system may interpret several applications as a sign that you are seeking multiple loans, which can make it more difficult to secure the best mortgage deals.

Be Honest in Your Application It’s crucial to be honest when completing your mortgage application. Any discrepancies or attempts to mislead mortgage lenders will likely be uncovered during the approval process, and could lead to your application being declined. Lenders have access to extensive financial data, and any false information may result in legal consequences or hinder your chances of securing a new mortgage deal in the future.

Conclusion

Securing a mortgage can be a complex process, but with the right advice and careful planning, it doesn’t have to be overwhelming. Take the time to understand the different types of mortgage deals available and the associated fees, and always seek advice from a trusted, experienced mortgage adviser. Whether you’re aiming for fixed or variable rate mortgages, or need a guide to the best mortgage deals, don’t hesitate to ask for professional help.

For more advice about buying a property, get in touch with us here at Duncan Yeardley. We’re here to help and can put you in touch with our friends at Mortgage Required.