Essential Guides & Advice The Essential House Buyers Guide

Date Published:

22/05/2008

Sorting out a mortgage can often be a confusing process, so be careful not to rush everything.

Step 2: Getting a mortgage

Aim to get a mortgage offer "in principle", in writing. This means they are provisionally happy to lend you money, depending on the eventual property. There are 100% mortgages, but you will pay higher interest rates and other fees, and have less choice of lender than if you had even just 5% deposit.

Use a mortgage broker to find you the best deal. They should:
Save a lot of research time and effort.
Avoid multiple unsuccessful applications which can affect credit rating.
Offer access to more obscure products, eg for people with irregular income, such as freelancers.
Be free. Make sure you use one that does not charge you a fee. The lender pays, though this cost can be passed onto you, buried in the mortgage "fees". If you do arrange your own mortgage with, say, your bank, negotiate hard to reduce such fees.
Deal with negotiations with bank and chasing things up, especially during the purchase period, and especially if the broker is attached to the estate agency.

Mortgage types are now numerous but the basic ones on offer are repayment, which is where monthly payments include capital and interest, with the former increasing over the years, and interest only where monthly payments are much less BUT it will never pay off the purchase price of the property. People should have an alternative method such as shares to cover the shortfall.

You must also decide if you want to fix your mortgage interest rate for a period: good if interest rates rise, not so good if they fall. However, it does mean no nasty surprises in your budget. Or you can "float", which means your payments could go up or down.

Useful Contacts

4Homes Mortgages: guides and tools
Council of Mortgage Lenders
Financial Services Authority’s consumer website