How to get a mortgage
It sounds simple: "I'll get a mortgage." But if you've never done it before, you probably don't know where to start. Even people who already have a mortgage can be uncertain what to do when they need another one.
So, your very first step when you want a mortgage is to choose whether you'll do it yourself or ask a mortgage broker for help. A mortgage broker already knows the market inside out and is on top of the latest & best mortgage deals available. A broker takes the hard work out of finding the best mortgage for you and handling most of the paperwork. And with L&C it costs you nothing.
The DIY route involves finding a lender among the dozens in the market. And then deciding what type of mortgage you want from the thousands of different mortgages to choose from.
Whether you are researching the market yourself or talking to a broker, it helps if you understand the sort of decisions you'll be making so we explain more about this below to help you on your way.
Decide what type of mortgage you want
There are several different types of mortgage to suit people's different situations. The main ones are:
- fixed rate mortgage
- tracker mortgage
- discount mortgage
- flexible mortgage
Fixed rate mortgage
Fixed rate mortgages have a fixed rate of interest and last for a fixed number of years. The big advantage of them is that you know exactly how much it'll cost you each month for the life of the mortgage, which is usually two, three or five years.
Whatever happens to other mortgage rates in that time, your rate will stay the same. This is good if mortgage rates generally go up but not if they go down. For people who need to budget carefully, the advantage of knowing how much you'll pay out every month is worth the risk that you'll miss out if mortgage rates fall.
Tracker mortgages have competitive interest rates and last for a fixed period of a few years. The interest rate is linked to the Bank of England base rate by a set percentage. The amount depends on the particular mortgage deal. Whenever base rate goes up or down, so too will the cost of your mortgage.
Lenders have a basic standard variable rate (SVR) mortgage - a discount mortgage is a discount on that rate for a set period of years. It makes the mortgage cheaper to start with, although the cost will go up if the SVR goes up.
Flexible mortgages allow you to make changes to your repayments if your circumstances change. You can choose to pay in more than your agreed payment if you can afford it. In fact most mortgages allow this.
But, unlike other mortgages, for a short time you can pay less or even take a payment holiday and stop paying altogether for a few months.
You need to know that there is a price to pay for this flexibility - the mortgage rate will be higher. So only pick a flexible mortgage if you're likely to need the option to underpay because most other mortgages allow you to overpay anyway.
Save your deposit
It's worth saving as big a deposit as you can. The more you put down as a deposit means the less you need to borrow and it also gives you a bigger choice of good mortgage deals.
You'll need to have saved up at least 5% of the price you're paying for your home but if you can manage 10% or more, you'll get a better mortgage deal.
First time buyers and indeed anyone who's struggling to save a deposit for property worth up to £600,000 should think about the government's Help to Buy scheme.
There's more information in our Help to Buy guide and First Time Buyer guides.
Budget for extra charges
Your mortgage and your deposit are not the only costs of buying a home (/mortgage-guides/costs-of-buying-a-house). Before you can move in, you'll have to pay out for some if not all of these expenses:
mortgage arrangement fee
- valuation fee
- legal fees
- stamp duty
- moving costs
You can see that there is a lot to think about when buying your first home.
At London & Country our mortgage advisers can help you every step of the way. We can help you work out how much you will have to pay and hold your hand with the paperwork.
There is no charge for our service. It is fee free.