A mortgage is a path to buying the home you want but it's also likely to be the biggest financial commitment you ever make. So, finding the best mortgage rates & the most suitable mortgage deals is vital, here’s how.
Choosing a mortgage is an important financial decision, pick the wrong one and it could end up costing you thousands of pounds in interest and charges more than it needs to.
Simply sticking a pin into a list of the top 10 mortgages isn't enough either.
Here’s how to ensure you find the best mortgages for your circumstances.
Establish what you need
The first step towards getting a mortgage is to work out what you need, including how much you need to borrow, what you have available to use as a deposit and how much you can afford to repay each month.
You should also work out the likely loan-to-value you'll need to borrow - this is the percentage of your new property’s value you will need to borrow from a mortgage provider to be able to purchase the property you've set your sights on.
Grabbing a calculator and establishing what you need from your mortgage in this way before you start comparing various mortgage offers is a good way to cut out a lot of irrelevant deals that you either won’t qualify for or that don’t give you what you’re looking for.
Interest only or repayment?
Choosing between an interest only and repayment mortgage is also a vital first step when finding the best mortgage deals.
Interest only mortgages are usually cheaper than their repayment counterparts but will only pay the interest due on your mortgage and not actually reduce the outstanding balance. This means you need to pay into a separate savings plan, an investment, or have some other means of repaying the whole amount you've borrowed at the end of the term.
A repayment mortgage will gradually pay off the outstanding balance of your mortgage as well as the interest you owe from your monthly repayments, meaning at the end of your mortgage you own your property and have nothing left to pay.
However, because you're repaying the balance on top of the interest the amount you'll have to pay each month will be slightly higher - although you won't need to set up and pay into a separate investment to clear your mortgage balance at the end of your term.
For more help deciding read our guide: Mortgages: Repayment-vs-Interest Only.
Choose a type of mortgage
There are thousands of mortgages on the market in the UK; however, the vast majority of residential mortgages will fall into one of three categories, Fixed Rate Mortgages, Tracker Mortgages and Discount Mortgages.
Each type of mortgage works slightly differently, offering various reassurances regarding their interest rates, which determines how much your mortgage costs.
Deciding which of these types of mortgages best suits your circumstances before you begin to compare mortgage rates and specific deals will help you eliminate offers that don’t suit your finances so you can find the cheapest suitable mortgage quicker.
For more help deciding which type of mortgage is best for your finances read our guide: Fixed, Tracker or Discount Mortgage?
As well as the 3 main types of mortgage there are several other mortgage products you may want to consider.
If you have a substantial amount in savings you may want to consider an offset mortgage which would link your savings to your mortgage and mean you're only charged interest on the difference between your savings and the outstanding balance.
If you have poor credit then you may want to consider applying for a mortgage specifically tailored for people with bad credit. Although theses mortgages may be a little more expensive you will have a greater chance of your application being successful.
Compare interest rates
Once you've established how much you need to borrow and the type of mortgage you want to apply for, the next step is to search for the cheapest mortgage interest rates on offer.
Finding cheap mortgages is intrinsically linked to finding a low interest rate - as you will be repaying your mortgage back for several years it is the interest rate which will largely determine how costly each mortgage is.
Use our mortgage comparison table to compare mortgage rates side by side so you know which mortgage lenders are offering the lowest rates for your circumstances.
Check the fees
Once you found the lowest possible mortgage interest rates available on suitable mortgage deals the next step is to check the fees associated with each mortgage.
Although the interest rate applied to the mortgage is likely to represent the bulk of the cost, mortgage fees have started to climb in recent years, with some mortgage providers charging anywhere up to £2,000 as an application fee for their best mortgages.
This means that mortgage fees can still make a significant difference to finding the best deal when you compare mortgages.
Deciding how to pay your fees can also have a big effect on how competitive your mortgage deal ends up being, read our guide: The Mortgage Mistake That's Easy to Make.
Once you've checked the fees of the top mortgage deals go for the option that will cost you least overall when you take the interest, fees and charges into consideration.
Before you apply for any mortgage deal, you should also check that you meet all the stated eligibility criteria, this will avoid you application being declined and leaving an unnecessary search on your credit file.
For a step by step guide on choosing the best mortgage and access to useful resources to help you make a decision, try following our Action Plan: How to get the best mortgage deal.
Other useful resources for mortgages: