How to get a mortgage
The mortgage market may still be in the doldrums, but you can still get a good deal. Moneywise TV explains how...
Whether you're thinking of buying a one-bed flat, a family house or a grand mansion, we all need mortgage advice at some point. There's a huge selection out there, but it's important to find the right one for you.
The first thing to think about is whether you need a repayment of an interest-only mortgage. An interest-only mortgage means a cheaper monthly repayment as you will only pay off the interest rather than the capital, whereas a repayment mortgage clears the entire debt at the end of the term.
Then consider other factors. Will your income change, and when? Do you want to budget for fixed payments, or are you happy to see your interest rate vary? Are you willing to shop around and switch mortgages at the end of the term, and do you need flexibility if you want to take a break?
Then you need to decide what type of mortgage you need.
Mortgages fall into three categories: standard variable rates (SVR), which falls in line with the Bank of England base rate; fixed rates, where the interest rate is fixed for a set-term; and capped rates, where the interest in capped at a set level.
Within variable rates the are tracker mortgages, which has an interest rate that is 'tracked' to the base rate, and discounted rates, where the rate is fixed below the lender's own standard variable rate.
These variable rate mortgages have interest rates that can go up or down, generally depending on the base rate. This means you can't be sure of your typical monthly repayments, as you can be with a fixed-rate mortgage.
If you have a big savings pot, an offset mortgage allows you to offset your savings against the mortgage debt. It can mean higher interest rates, although lower monthly payments.
There are several websites where you can compare different mortgages and interest rates, but they don't show your eligibility for the product. The best way to find a mortgage deal is through an independent mortgage adviser who will look at lots of different lenders and find a product that's best for you.
Shop around to find the best deal. The big banks still offer the best products, but some smaller building societies also offer good deals.
Mortgages come with all manner of charges and conditions, so ensure you look at total fees you will have to pay rather than just the interest rates.