Step 3. Speedily compare to benchmark your cheapest. It’s important to start to work out the exact cost you’re likely to pay as soon as possible. Mortgage rates are currently the lowest they have ever been, with even 5 year fixes below 2% (if you’ve a big enough deposit). While there is always the chance that they could sneak even cheaper, there’s not that much room to fall, yet there’s far more room for them to rise in future. To find a mortgage you want to look across the whole market if possible. There are a number of lenders like Yorkshire BS, Tesco Bank and HSBC who only offer their mortgages direct, and these may be missed by mortgage brokers. So it’s important to start by doing a comparison that includes all deals. My own
www.mse.me/ mortgagebestbuys comparison tool does, as does
www.moneyfacts.co.uk and Googles mortgage tables.
Step 4. Two things that can kibosh your application. The days when lenders flung out deals to all and sundry are long gone. Getting accepted is now a challenge – I would suggest you start preparing and you position yourself at least a year in advance, or failing that as soon as possible.
a) The credit check. It’s crucial to manage your credit
score, other preferably months applications and put
advance, eg, never make late payments, minimise
in a
landline not a mobile on applications. See my 35 credit score boosting tips at www.
mse.me/creditscore to make sure that you’re in good financial shape.
b) Affordability checks. Lenders must stress- test if your mortgage is affordable, even if rates were 6-7%. They’ll want evidence of income, big bills, expenses, even eating out.
So being frugal in advance helps.
One way to navigate through these checks, is to use a top mortgage broker, you can search for one using
www.vouchedfor.co.uk or www.
unbiased.co.uk - they have info on how harsh each lender’s checks are, and can help ease acceptance. You’ll generally pay a fee for face to face advise though brokers like
www.lcplc.
co.uk operate fee free via the phone (they get a fee from the lender).
Step 5. Don’t fall for ‘Help to Buy Mortgage’ branding. While much hyped, the main Help to Buy scheme (ie, not the original only for new builds) is about the Government giving LENDERS a guarantee to enable them to offer more 5% deposit mortgages, meaning more are available. If you’re looking for a 5% deal, it makes no difference to you whether it’s a Help2Buy or not. Just go for the best available.
Step 6. Fixed or variable? With a fixed mortgage, the amount you repay is, er, fixed so it’s like buying an insurance policy against possible rate rises. Variable deals move with UK interest rates (sometimes just at the provider’s whim). Currently you only pay a touch more to fix.
It’s very difficult to predict future interest rate moves. Even top economists are singing a different tune now from a year ago, and there’s even the possibility they may fall before that. So focus on your own situation.
The more crucial the security of knowing exactly what you’ll pay, the more you should edge towards fixing (& fixing longer). If cracking the rock-bottom deal’s your driver, edge to short-term trackers.
@MoneySavingExpert 51
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