How to Find the Most Suitable Mortgage for You

Jun 17, 2024
How to find the most suitable mortgage for you
Finding a great mortgage deal is not just about searching for the best mortgage rate. You also need to consider which is best for your circumstances and how you can improve your chances of getting accepted.
To help you find the best mortgage deal for you, here are six key questions to ask yourself

1. How can I improve my credit rating?

To qualify for the best mortgage deals, you’ll need a good credit score. Mortgage providers will check your details with at least one of these credit reference agencies: Equifax, Experian and Callcredit. It’s worth checking your files with all three before applying for a mortgage. This way you can avoid any surprises, and you’ll have time to correct any inaccuracies you might find.

Other ways to make yourself more attractive to lenders include paying off unsecured debts, cancelling all unused credit cards and not applying for any other credit before you make your mortgage application. If you’re not already, get on the electoral register, as you will find getting a mortgage easier if you are registered to vote.

2. How much can I afford to borrow?

Many prospective buyers focus their efforts on working out how big a deposit they can put down. A more important question is how much can you actually afford to repay on a monthly basis. Mortgage applications used to be assessed based on the size of your salary but now lenders will look closely at your income and outgoings and weigh up whether you could keep up with repayments if interest rates rise or your circumstances change.

Expect to be quizzed on how much you spend on food, childcare, car loans, your energy bills and even a mobile phone or gym contract. To work out for yourself what you can comfortably afford to borrow, use this handy mortgage affordability calculator from the Money Advice Service.

3. What type of mortgage is right for my situation?

Mortgages come in all shapes and sizes. You must decide whether you want the security of a fixed-rate with an interest rate that stays the same for a set period, or the flexibility of a tracker deal which will change in line with the Bank of England base rate. Mortgages come in two parts: the capital, which is the money you borrow, and the interest, which is the charge from the lender on the money you owe. You must make a decision on whether you want to repay capital and interest, repay the interest only, or a combination of the two.

There are three different mortgage repayment methods: Repayment mortgage – You make monthly repayments for an agreed term until the capital and interest have both been paid back Interest-only mortgage – Each month, you only pay the interest on the amount you borrowed Combined repayment and interest-only mortgages – Some lenders offer mortgages on a part interest-only and part-repayment basis, which means some of the mortgage capital requires repaying at the end of the term.

4. Speak to a New Homes Mortgage Adviser (NHMA)

You can get help with deciding on the best option to take by speaking to NHMA. They will offer professional advice and are often the best place. They will find you a mortgage that suits your needs and save you time researching online yourself.

5. What’s the best deal I can find?

Now you’ve got a benchmark it’s time to shop around using a few comparison websites. As well as speaking to an NHMA, the independent Money Advice Service recommends the following sites: Moneyfacts, Money Saving Expert,. Alternatively, the experts at London & Country Mortgages offer free, independent guidance. They all work slightly differently, but you can usually refine their best-buy table by what type of buyer you are (e.g. first-time buyer/moving home/remortgage) and what type of mortgage you’re looking for (e.g. fixed or variable/tracker/discount). When comparing deals, pay attention to:

  • Initial deal length (e.g. 2 years)
  • Interest rate (e.g. 1.99%)
  • Fees (what arrangement, booking and valuation fees apply)
  • Monthly payment

Be sure to factor in all the fees you’ll have to pay – don't be swayed by the headline interest rate. You will probably notice how the fee-free mortgages usually have a higher interest rate, whereas those with a high arrangement fee often have a lower interest rate. To help you compare, look at the overall cost for comparison as expressed by the Annual Percentage Rate of Charge (APRC).As this figure takes into account the upfront fees, it’s a good illustration of the whole cost of a mortgage. 

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage. The content of this article is not tailored to your circumstances and therefore should not be taken as financial advice.