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What type of mortgage are you looking for? What type of mortgage is right for you?

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Written by Dan Base, Financial Content Writer

20 December 2018

Here is how to choose a mortgage whether you are buying your first home, moving house or remortgaging to get a better deal on your property.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Why you need to choose carefully

Finding the mortgage that is best for your financial circumstances could help you:

  • Find one that you are eligible to apply for

  • Have more chance of being accepted

  • Save money with smaller repayments

  • Save money with a lower overall cost

  • Make sure you can afford the repayments

How to get a mortgage if you are self employed

Do you need help and advice?

You can talk to a financial adviser or broker for advice and recommendations on a mortgage that suits your financial circumstances.

Use our mortgage form to find a broker who can help you choose a mortgage.

How large is your deposit?

Deposits are the amount you pay towards buying a property yourself. This can come from your savings or from the equity you own in your current home.

If you have £20,000 saved and want to buy a £100,000 property, your deposit would be worth 20% of the purchase price. Your mortgage pays for the rest of the price, and the percentage it covers is called the loan to value (LTV). In this example the LTV would be 80%.

Mortgages with a lower LTV are usually much cheaper because lenders will consider you less of a risk if you have a large deposit and can offer lower fees and interest rates.

Use our comparisons to only look at mortgages that you can get with the deposit you have. You can filter the results by the LTV required, so if you have a 20% deposit, only look at mortgages that offer an LTV of 80% or higher.

Compare mortgages by their LTV to match the deposit you have

What if you have no deposit?

The only mortgages you can get without a deposit are guarantor mortgages, which require someone else to agree to cover your repayments if you miss them.

However, there are mortgages designed for low deposits and a range of schemes that help you get on the property ladder or save a deposit.

Here is how to get a mortgage with no deposit or a small one

How long do you need to pay it off?

You can choose the term of your mortgage when you apply. This is how many years you will pay it off over. Mortgages are usually taken out over 25 years, but some lenders offer up to 40 years.

Choosing a longer term means your repayments will be smaller each month. A shorter term means you will pay it off quicker and pay less interest and less in total.

Here is how to choose the length of your mortgage term

Do you want a fixed rate?

Mortgage interest rates can change, which means the amount you repay could go up if your interest rate rises.

You can get interest rates that are fixed for up to ten years. This means you will pay the same amount each month until the fixed rate deal ends.

You can also get other types of interest rate:

  • Standard variable rates (SVR) can change at any time

  • Tracker rates rise and fall when an index like the Bank of England base rate changes

  • Discount rates are a set amount below the lender's SVR

What type of interest rate should you get?

Do you want an interest only mortgage?

You can pay off your mortgage in two ways:

  • Repayment mortgages put the amount you pay each month towards both the interest and reducing the balance of your mortgage until it is paid off.

  • Interest only mortgages put your repayments towards the interest but the amount you owe will not go down. You will need to save up separately to pay off the balance.

How to decide if you should get an interest only or repayment mortgage

Do you already have a mortgage?

Remortgaging

If you already own a home but want a better mortgage, you can switch to a new deal.

You could pay less by getting a better interest rate as long as the fees do not cancel out what you could save. Here is how to work out if you can save money with a remortgage.

Moving house

If you want to move house you can either transfer your existing mortgage to your new property or get a new mortgage for your new home.

What type of buyer are you?

Are you a first time buyer?

Not every mortgage is available to first time buyers, and many are only available if you have a large amount saved for a deposit.

However, there are many mortgages designed for first time buyers and schemes to help you get on the property ladder like:

  • The Help to Buy scheme gives you government support with your mortgage

  • The Right to Buy scheme lets you purchase your council house with a discount

  • Guarantor mortgages require another person to be named on the mortgage to cover your repayments if you miss them

  • Shared ownership mortgages let you buy a percentage of a property, which means your repayments and deposit could be much lower

Here is everything you need to know about buying your first home and the types of mortgages you can get.

Do you have bad credit?

Your credit history can put lenders off giving you a mortgage if you have:

  • Missed repayments on a mortgage, credit card, loan or other form of credit

  • Been through bankruptcy or had a county court judgment against you

  • Already borrowed more than you can afford to repay

However, you may still be able to get a mortgage. Although they are usually more expensive and require a larger deposit, bad credit mortgages may be more likely to accept you.

Can you get a mortgage with bad credit?

Are you getting a joint mortgage?

You may be able to borrow more if you get a joint mortgage, and you can split the monthly repayments between you.

Most joint mortgages are taken out by couples, but you could get one with friends or family too. Some lenders offer them for up to four borrowers.

Everything you need to know about joint mortgages

Are you an older borrower?

If you need a new mortgage to move house or want to remortgage to a better deal, some lenders may not accept you if you will be retired before the mortgage is paid off in full.

However, you could still get a mortgage with a shorter term or from a lender with a higher maximum age.

How to get a mortgage when you are older

Do you want to use your home to borrow money?

You could use an equity release mortgage to borrow money from the share of your home you have paid off already. They can be expensive but could help you pay off the rest of your mortgage or make a large purchase.

Here is how equity release works and the alternatives you could use

Do you need a specialist mortgage?

Do you want cashback on your mortgage?

Some mortgages offer a lump sum that you get once the mortgage has been taken out.

Although this bonus can be useful, it could be cheaper overall to get a mortgage without cashback but a lower interest rate.

Compare cashback mortgages

Can you combine your mortgage and savings?

Some lenders offer offset mortgages that are combined with either:

  • A savings account

  • A current account

The amount you have saved reduces the amount of your mortgage you have to pay interest on. For example, if you had a mortgage of £150,000 and £50,000 in the linked savings account, you would only pay interest on £100,000 of your mortgage.

The amount this saves you could be more than the interest you would earn if you put the £50,000 in a savings account.

How offset mortgages work and when they can save you money

Are you building your own home?

If you want to build your own house, you could get a self build mortgage to pay for land, materials and other costs.

How to build your own house and get a mortgage

Are you self employed?

If you are self employed, you may not have a guaranteed salary and it can be difficult to prove how much you earn. This means not all lenders will be willing to offer you a mortgage.

However, some lenders may accept you if you can prove you earn enough to afford the mortgage.

How to get a mortgage if you are self employed

If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.

Compare mortgages

You may also like

  • How to get a mortgage if you are an older borrower
  • How do joint mortgages work?
  • How to get a mortgage with no deposit
  • What is the new Right to Buy scheme?
  • How to avoid first time buyer regrets