Landing the perfect mortgage may not have quite the same emotional buzz as finding the perfect property. But the right mortgage deal will save you money – possibly quite a bit of money – every single day you live in your new home. So why just sign up with the first lender who offers you the finance you need?
Here are our top ten tips to get the best mortgage deal.
- Shop around.“At the last count, there were over 5,000 mortgage products on the market,” says Daire Dowling of London mortgage broker at Arc & Co. (www.arcandco.com). “It is a hugely complex market, and the chances that your own bank will be able to make you the best mortgage offer available, are nil.”
- Use a mortgage broker.Not surprisingly, given the complexity of the market, 85 per cent of mortgages in the UK are now arranged through a broker. Reputable brokers will have a transparent fee structure and not charge you until the mortgage deal has been sealed.
- Maximise your credit rating.With a good credit rating, you are ahead of the game. With a bad one – for example, if you have defaulted on rental payments – you may be lucky to get a mortgage at all. It is a good idea to use a credit card regularly and pay off any outstanding amount promptly – it will help establish your credentials as someone to whom it is safe to lend.
- Remember that your lender will check on your spending habits.“If you are about to mortgage yourself to the hilt, it is not clever to go on a spending spree beforehand,” explains Daire Dowling. “Your lender will look at your bank statements and may take fright. It is better to present clear evidence that you can manage your finances responsibly.”
- Find the right type of mortgage for your circumstances.Fixed rate or variable rate? It will depend on a whole range of factors, such as how old you are and the likely pattern of your earnings. Variable rate mortgages are rarely advisable for people stretched to their financial limit and not able to withstand a rise in interest rates.
- Leave the right sort of footprint. “Lenders tend to be suspicious of people who have lived in several different addresses in the last year,” adds Daire Dowling. “They prefer ones who are on the electoral roll, can produce documentation such as old gas bills and include a landline in their application.”
- If you are self-employed, make sure you can demonstrate that you have a regular income. Keep scrupulous accounts, dating back as many years as possible.
- Check when your introductory deal runs out. “A lot of lenders will start people off on a super-competitive interest rate, then raise the rate after two or three years,” says Daire Dowling. “It is important to keep tabs on what rate you are being charged and, if necessary, change your lender.”
- Research. It sounds obvious, but remember to research the mortgage market thoroughly. Speak to friends or family, talk to your estate agent and brokers for their recommendations. Online mortgage calculators can be a useful guide, too.
- Review your mortgage regularly.The market is now so competitive that you should review your mortgage at regular intervals and be prepared to re-mortgage your property on better terms.
Like the property market, the mortgage market is fast-moving and often complex. But shop around, weigh up your options carefully, be flexible, and all the time and effort will be rewarded.
- For more information on mortgages, visit Arc & Co. (arcandco.com).
- Are you house-hunting or wondering how much your house is worth? Contact Henry & James at 1 Motcomb Street, London SW1X 8JX (020 7235 8861; firstname.lastname@example.org).