Flow chart: What kind of mortgage will suit you?

QUESTION :

Do you need the security of knowing what your payments will be over a certain period of time?

YES

You need a fixed rate mortgage

With a fixed rate mortgage the mortgage lender fixes the interest rate owed on your loan for a set period of time, usually between one and five years.

After that it normally reverts to the lender's SVR but you should consider remortgaging

NO

You need a variable or tracker mortgage

The interest rate on a variable or tracker mortgage goes up or down in line with a pre-determined rate – normally the Bank of England base rate.

QUESTION :

Do you have savings?

YES

You should consider an offset mortgage. This type of mortgage allows you to offset your savings against the amount you owe on your mortgage which will reduce your mortgage payments.

NO

You don't need a mortgage with offset features.

If you don't have enough for a downpayment deposit you might need to get a 100% mortgage (see below).

QUESTION :

Do you want to own the house outright at the end of the mortgage term?

YES

You need a repayment mortgage.

A repayment mortgage guarantees to pay off you mortgage debt by the end of the term.

It comes with higher interest payments than an interest-only mortgage.

NO

You should consider an interest-only mortgage.

Repayments are cheaper on this type of mortgage but at the end of the term you will still owe the capital you borrowed – meaning that if you haven't set up some kind of repayment vehicle (e.g. an endowment or ISA) you might need to sell your property.

QUESTION :

Do you want to be able to make over and under-payments?

YES

You need a flexible mortgage.

Flexible mortgages enable you to make over and underpayments and take mortgage payment holidays. This could be useful if you are self-employed, get an annual bonus or your income fluctuates.

NO

You don't need a mortgage with any flexible features.

QUESTION :

Can you prove what you earn?

YES

You should be eligible for a mainstream mortgage

NO

You might need a self-certified mortgage.

With self-cert mortgages you have to declare what you earn but not prove it. Self-cert mortgages are suitable for self-employed people of those with several income streams.

QUESTION :

Have you had credit problems in the past?

YES

You might need a bad credit mortgage. Having past credit problems makes getting a mortgage more difficult but not impossible – although you will have to pay a higher rate. A broker will be able to find you the best bad credit mortgages.

NO

You should be eligible for a mainstream mortgage

QUESTION :

Are you planning to rent out the property?

YES

You need a buy-to-let mortgage. BTL mortgages are for landlords renting out property. The amount you can borrow will be based on the rent you can get for the property rather than your income.

NO

You should be eligible for a mainstream mortgage

QUESTION :

Are you thinking of moving house soon?

YES

You either need a portable mortgage that you will be able to transfer to your new property or a mortgage with no early redemption penalties.

NO

A mortgage with early redemption penalties shouldn't be a problem although you will have to pay them if you want to remortgage before your fixed term or locked-in period expires.

QUESTION :

Have you got a deposit?

YES

Depending on how much of a deposit you have, you will be eligible for most mortgage deals.

NO

You will need a 100% mortgage. This is where the lender lenders you 100% of the purchase price of your home. However this is risky – if property prices fall you will be in negative equity straight away.

QUESTION :

Have you got enough money for solicitor's bills, stamp duty and moving costs?

YES

You should be eligible for a mainstream mortgage

NO

You will need a 100% plus mortgage. Only a few lenders offer these deals and they come with higher rates. These lenders will lend up to 125% of the property value. The extra money could be spent on solicitor's bills, moving costs and furnishing your new home.

QUESTION :

Will you need your parents to guarantee your payments?

YES

You need a guarantor mortgage. This is where your parents or other relative will take responsibility for your payments if you default.

NO

You should be eligible for a mainstream mortgage

QUESTION :

Would you like help to find your best mortgage?

YES

You need to speak to a mortgage broker .

NO

If you go it alone bear in mind that mortgage brokers have access to thousands of deals not on the open market and can help find the right one for you.