Choosing the right mortgage

A mortgage is a specialist loan for those looking to purchase a property, and there are many different mortgage products available these days.

The type of mortgage that will best suit you will depend on a number of factors, including your budget, your needs, and your preferences. A mortgage is one of the most important and long term financial commitments that you are ever likely to make, and therefore it is important that you make the right decision when selecting a mortgage product.

When you are looking for a mortgage you need to determine whether you want a repayment mortgage or an interest only mortgage. The latter is often classed as high risk, and some lenders will not offer interest only loans.

This is because all of your repayment will be applied to the interest on the loan, which means that at the end of the mortgage term you will still owe the principle loan.

A repayment mortgage, on the other hand, reduced over the term of the mortgage, and at the end of the term your mortgage should be fully paid off.

When choosing a mortgage you need to decide on the type of mortgage that you want – e.g. fixed rate, variable rate, base rate tracker, discounted, etc.

You also need to make sure that you get the most competitive rate of interest and suitable repayment periods. Below you will find some commonly asked questions relating to finding the right mortgage product:
How do I know which mortgage is the right one for me?

It is important to do your research when looking for a mortgage, as there are many different mortgage products on the market.

You will find plenty of information on different mortgage products online, and it is therefore worth spending some time looking at the different types of mortgages and weighing up the pros and cons to determine which ones will best fit in with your needs and circumstances.

If I have bad credit can I still get a mortgage?

It is more difficult to get a mortgage if you have poor credit, particularly in the current financial climate where lending conditions are tight due to the global credit crunch.

However, there are lenders that will offer mortgages to those with poor credit, but the interest rates are likely to be much higher than standard rates, which means that repayments will be higher.

Should I ask the bank for advice on which mortgage to choose?

You will find advisors at most banks and building societies who can offer advice about their mortgage products and point you in the right direction based on your needs and circumstances.

However, these advisors will be advising on the bank’s or building society’s own products and not on products from other lenders, so you need to be careful – there may be a much better deal out there from another lender.

Will a mortgage broker be able to help me find the right mortgage?

A reputable mortgage broker will have links with a wide range of lenders and access to a good choice of mortgage products. Once you have provided your details to the mortgage broker he or she will aim to get you the most competitive deal based on your circumstances.

However, you should advise the broker if you are looking for a specific mortgage type, such as a fixed rate or a variable rate, so that the broker does not waste time looking at mortgages types that you have already decided against.

How can I get unbiased advice?

An independent financial advisor can offer independent advice on mortgage products from across the market, as these professionals are not tied to any particular company or mortgage.

These advisors can make recommendations based on your circumstances and needs, and can help to find you the right mortgage.

If independent advisors are paid by commission how do I know they won’t send me to the lender that pays the highest commission?

This is a concern than many borrowers have, but there is a way around this, and this is to find an independent financial advisor that is paid by you as the customer.

Although this may cost you a few hundred pounds upfront, you can enjoy the peace of mind that the advisor is working in your best interests and is not basing his or her recommendation on the amount of commission offered by different lenders. With mortgages being such long term and important financial commitments this is definitely a few hundred pounds well invested.

What do I do if I cannot get a high enough mortgage to afford a property?

Property prices are still high, and affordability is stretched for most first time buyers. However, there are other options available, such as shared ownership or the government’s new HomeBuy scheme, where you can get onto the property ladder without having to raise such a large mortgage or deposit.