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How to find the cheapest mortgage deal

How do you find the best mortgage deal for you? What mortgage suits you best? and How can I get a cheap mortgage?

Well with over 8,500 mortgage products from 100 plus mortgage lenders it is very difficult to find the cheapest mortgage deal. There is effectivley a mortgage product for everyone. There are specialist first time buyer mortgage deals, self employed mortgages, self certification mortgages, mortgages for people with bad credit and ccj’s, and buy to let mortgages. In order to find a good deal you need to do some research online and use a good mortgage comparison service and talk to a broker

Please learn more, find and compare the best mortgage products from all the UK lenders in our Mortgage guide channel

How much money can I borrow?

How much you will be allowed to borrow depends on your income, and on the value of the property you are buying. Usually you can take a mortgage up to 95% of the property although some lenders offer 100% mortgages.

Typically one person can borrow up to three times their annual gross earnings and couples three times the higher salary plus one time the lower salary. You may also be able to borrow three and a half times their joint income. Some lenders will even contemplate lending you 4 or 5 times your salary in order to help you on the property ladder.

Lending policies vary from lender to lender and you should shop around to find out what is available. Remember that the term of your mortgage will probably be between 15 and 30 years.

WARNING – remember to make sure that you do not overstretch yourself, this mortgage will be with you through boom and lean times, make sure you can afford it and you can afford to pay it off.

What is a mortgage?

Mortgages are a type of long-term borrowing. Typically, you might borrow for a ‘term’ of 25 years. But you can take out a mortgage with a shorter (or longer) term.
You can pay off some or the entire loan before the end of its original term (though there may be a charge if you do this – see Mortgages – charges).
You can switch from one lender to another – called ‘remortgaging’.

There are two basic types of mortgage:

Repayment (also called ‘capital and interest’). Your monthly payments pay the interest and also repay part of the amount you borrowed (called the ‘capital’). Provided you make all the agreed payments, the whole loan is paid off by the end of the term;

Interest-only Your monthly payments pay only the interest. You don’t pay off any capital until the mortgage comes to an end. To make sure you have the money to do this, usually you also make monthly payments into an investment plan, such as an individual savings account (ISA) or endowment policy (and these types of mortgage are commonly known as ‘ISA mortgages’ and ‘endowment mortgages’). The plan grows to provide a lump sum by the end of the term which, hopefully, is enough to repay the loan. Whether it is enough depends on stock market performance. So interest-only mortgages are not suitable if you are uncomfortable with investment risk.

What interest rate do I pay on a mortgage?

Lenders use different types of interest rates across their mortgage products. The following types of interest rates are the most common:

Standard variable rate? (SVR) The lender’s main rate. ‘Variable’ means it goes up and down broadly in line with general interest rates.
Tracker
Designed to fall – and rise – in line with a rate or index such as the base rate set by the Bank of England.
Discounted rate
A set amount off the lender’s standard variable rate for the first few years of the mortgage. Useful because the mortgage is cheap at a time when you may be facing lots of extra costs, such as moving expenses, buying furniture, and so on.
Fixed rate
The interest rate stays the same for a set number of years. Useful because it helps you to budget with certainty, but you could lose out if variable rates fall while your rate is fixed.
Capped rate
This is a variable rate that goes up and down in line with interest rates generally but never rises above a set level (the ‘cap’). Useful because it helps you to budget and still allows you to get the benefit of any falls in interest rates.