The Three Golden Rules to Getting a UK Mortgage

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The Three Golden Rules to Getting a UK Mortgage

Rule One: Shop Around

Shop around for the best deal. Newspapers and websites are good places to look for regularly updated best buys. You can see our best buy tables here

Make sure that your mortgage suits you. Rates can vary enormously between lenders – anything between 4.5% for fixed rate deals to 6.5% - that's a difference of up to £1,600 per year on a £100,000 loan!

If you already have a mortgage, check your existing lender's deals - it’s often cheaper to move mortgage within your current lender's range of products than to go outside. Go and talk to the mortgage advisor and ask for a better deal – the threat of losing a customer can have a surprising effect on a hard-nosed lender!

Beware additional costs: you may have to pay a penalty if you move your loan. Read the small print of any new loan to ensure the lender isn’t hiding some of the costs in order to offer a tempting rate.

Compare all the costs of the mortgages you’re interested in with your existing mortgage over a period of a couple of years. The easiest way to do this is via the APR

Shop around for better rates on your insurance premiums as well. Rates for the kinds of insurance associated with your mortgage: life insurance, mortgage protection insurance, critical illness protection, are often over-priced. Check the internet and in newspapers for better deals.

IMPORTANT NOTE

Many websites don't make it clear that filling in their enquiry form means you might be credit checked. This puts you at risk.

Lenders often assume an enquiry to a rival means you were turned down - and not that you are in fact carefully shopping around and rejecting the bad deals.

The best way around this significant problem is to ask an independent mortgage adviser. Without making an actual application they will know which deals are best for you. They will also know how likely you are to be accepted by the lender.

Rule Two: Watch the rates.

Obviously the rise and fall of interest rates can have a big impact on your mortgage repayments but what should you do if rates change?

Many people will react to a period of interest rate stability by moving to a tracker mortgage and to a period of interest rate rise by opting for the stability of a fixed rate.

Wrong!

Fixed rate mortgages are usually better when prices are low or stable and rise to protect the lenders investment when rates rise. Although it might seem counter-intuitive to do so, consider cheap fixed deals when interest rates fall.

If you do take out a fixed mortgage at a favourable rate remember: you’ll have to shop around when the fixed period comes to an end to avoid a sudden, unwelcome, hike in your payments.

You can see the latest best mortgage deals here

Rule Three: Select The Type of Interest You Pay.

With average standard mortgage rates currently running at 6.8% a 25 year repayment mortgage on a loan of £100,000 would cost £210,600. You will pay more than the original loan in interest – a whopping £110,600!

You can cut the interest you pay, at the front end as it were, by getting a better deal on your interest rate but you can also pay less interest by paying the debt off more quickly.

Some mortgages allow the borrower to pay more each month or to pay off lump sums:

Flexible mortgages - where the interest is calculated daily and you can increase or decrease your repayment depending on your situation (do check that there are no fees or penalties).

Current Account Mortgages turn your loan into an overdraft and puts all your debt in one pot, allowing you to pay in and take out when you need to.

Offset mortgages work like flexible mortgages but allow you to reduce your interest bill by using savings.

And bear in mind that paying a larger amount monthly not only reduces your total interest bill but also reduces the length of the mortgage

Don’t let your mortgage cost more than necessary. A little bit of research could save you thousands of pounds.

More Tips on How to get the Best UK Mortgage

To read more on this subject please see the list below or your mortgage guide or your home buying guide

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