Your mortgage is probably your largest monthly expense, whether you are buying a home, or considering a remortgage, getting the best deal is therefore crucial.
Here are my seven top tips to help you do just that
1. The lowest rate isn’t always the best deal
That might sound strange, but it really isn’t.
The lowest mortgage rates often come with large upfront fees. A higher rate, with lower fees, may actually be a better deal. It’s important to do your sums though and work out which option represents the best deal over the long term.
2. Fixed or variable rate?
It might be hard to resist the attraction of a very low interest rate, but remember, rates may rise in the future. How would you cope if your mortgage payments rose significantly?
It’s often a trade off between lower rate, that may rise and certainty of a fixed rate, giving you security of knowing it will remain affordable.
3. Make it easy for the lender to say “yes”
Almost all mortgage lenders use a system known as credit scoring. Start by checking yours, and where possible, try to improve it by:
- Making sure you are on the electoral role
- Repaying your credit cards in full each month
- Avoid late payments
- Get mistakes on your credit record corrected
4. Keep your bank statements clean
New regulations mean that mortgage lenders have to consider each application in far more detail than in years gone by.
They will analyse your spending habits, often by looking at your bank statements, and may decline your application if they see things they don’t like such as bounced direct debits or unauthorised overdrafts.
5. Lenders like stability
Mortgage lenders find stability reassuring and it certainly helps to improve your credit score.
It might not be possible, but try not to change jobs or the property you rent in the year or so before you plan to make your mortgage application.
6. Save hard
Mortgage lenders give better deals to applicants who have largest deposit
Saving hard to build up your deposit, has the added benefit of proving to the mortgage lender that you have spare income, and can therefore afford the monthly repayments
7. Shop around
This might sound obvious but too many people get caught up in the excitement of buying a new home and make rash decisions.
I recommend shopping around for a mortgage before you start house hunting. This means you definitely have a mortgage in place when you find the house of your dreams and estate agents will expect to see a decision in principle before accepting your offer.