Choosing the right mortgage essentially comes down to two important considerations:
- Can you afford it?
- Is it a good deal?
Assessing affordability begins with using an online mortgage calculator, which can be a useful tool for calculating approximate monthly repayments.
After which, ensuring you get the best deal means using a reputable independent broker to conduct a whole of market comparison on your behalf.
In total, there are eight major areas that need to be addressed to ensure you get the best possible mortgage to suit your needs. Each of which will be discussed in-depth with your broker, prior to submission of your mortgage application.
- How much can I borrow?
The maximum amount you can borrow will usually be calculated on the basis of your annual income. For example, most mainstream lenders will offer mortgages to a maximum value of 4x or 5x the annual salary of the applicant, or the combined salaries of joint applicants.
- How much can I offer as a deposit?
The bigger the deposit you provide, the more competitive the mortgage you will subsequently be offered. In addition, qualification for a mortgage in the first place becomes much easier with a larger deposit payment. Most lenders require deposits of 10% to 25% to qualify for a mortgage.
- Is repayment or interest-only better?
If you are a first-time buyer, an interest-only mortgage is unlikely to suit your needs or in-fact be available. By contrast, many (if not most) buy-to-let mortgages are available exclusively as interest-only mortgages. Which of the two is better will therefore be determined by your intentions and objectives, which should be discussed in advance with your broker.
- Fixed or variable rate interest?
All mortgage rates are technically variable in nature, given how fixed interest rates are only fixed for a set period of say 2 or 5 years. However, this introductory fixed-rate period can amount to considerable savings if the provider in question is offering a highly competitive deal. Plus, it is worth remembering that at the end of this introductory fixed-rate period, you have the option of switching to a new or the same provider for an even more competitive deal.
- What about additional fees and charges?
Do not fall into the trap of assuming interest is the only major borrowing cost when taking out a mortgage. From initial arrangement fees to admin fees to legal fees to completion fees and early repayment fees, some lenders go to extremes to impose all manner of additional levies.
- Will I be able to overpay from time to time?
Some lenders welcome and encourage overpayment, in order to ensure debts are settled as quickly as possible. By contrast, others impose penalties for those who attempt to repay their debts early, especially within a fixed or discounted period.
- Could I qualify for a discount under a government scheme?
There are plenty of government schemes available that can open the door to enormous discounts or aid affordability of various types of properties. Examples of which include Right to Buy, Help to Buy and Shared Equity Schemes – all of which should be discussed with your broker to establish your eligibility or otherwise.
- Have I compared all options available?
It is impossible to fully compare all mortgages options available without the help of an independent broker. This is due to the fact that many specialist lenders in the UK provide mortgages exclusively via approved brokers and do not work directly with the public.