When you know how much you can borrow and the deposit needed, you need to compare the mortgages available on the market. This means looking at more than just mortgage rates and making sure you choose a mortgage that best suits your needs.
What’s in this guide
- 1. Do you want fixed monthly payments?
- 2. Compare more than just the rate
- 3. Do you want to add some or all of your mortgage fees into your mortgage?
- 4. How long is the fixed term?
- 5. Do you want the flexibility to overpay, underpay or take payment breaks?
- 6. Do you want to be able to move lenders, or remortgage, when you want?
- 7. If interest rates rise, do you want to make sure you won’t pay interest above a certain rate?
- 8. Do you want to use your savings to help pay off your mortgage sooner?
1. Do you want fixed monthly payments?
First, you’ll need to decide if you want a fixed or variable-rate mortgage.
Fixed-rate mortgage
This means paying a set amount each month for a given length of time. Fixed-rate mortgages deals are often for between two and ten years, but some lenders offer longer.
Variable-rate mortgage
This means the amount you pay each month can change in line with changes to the interest rate. This might go up or down.
Find out more in our guide Understanding mortgage interest rates
2. Compare more than just the rate
Look at the Annual Percentage Rate of Charge (APRC) when considering mortgages with different upfront fees. This shows you the annual total cost of your mortgage, including fees and charges calculated as if you kept your mortgage for its full term without changing it.
There are other factors to consider when choosing a mortgage. Make sure you shop around for a deal that works for you and that you can afford.
For example, if you’re willing to pay an upfront arrangement fee, you can often get a lower interest rate, but it might not cost less overall. If you go for a fee-free mortgage, you’ll probably have to pay a higher rate, but again it's important to compare the APRC.
Find out more in our guide Mortgage-related fees and costs
Using mortgage comparison websites
Comparison websites are a good starting point for finding a mortgage tailored to your needs. You can use these websites to compare mortgages:
Remember that:
- comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision
- it’s also important to do some research into the type of product and features you need before making a purchase or changing supplier.
See our guide Get the most out of comparison websites
3. Do you want to add some or all of your mortgage fees into your mortgage?
If you can’t afford to pay these fees right now, find out if you can add them to your mortgage. Bear in mind that you’ll pay interest on anything added to the mortgage for many years.
You should check whether the fees are refundable if the mortgage doesn’t go ahead. If not, it might be possible to request the fees are added to the mortgage and then to pay them once the application has been approved and is definitely proceeding.
4. How long is the fixed term?
Most mortgages start off at an introductory rate, or fixed term, for a set number of years. These are usually for between two and ten years, but some lenders offer longer.
After this period, the interest rate goes to the standard variable rate, which is likely to be much more expensive than you’re currently paying.
If you want to remortgage, or move house during your fixed rate, you might have to pay an early repayment charge. This can be quite expensive.
So, if you might want to move in the next couple of years, a longer-term fixed rate might not be the best option. A shorter fixed rate might cost you more in the long-term, but saves you a lot by not having to pay the early repayment charge. Some lenders offer to ‘'port’' your mortgage, which is taking your fixed rate to the new home without paying early repayment charges, although this isn't guaranteed.
5. Do you want the flexibility to overpay, underpay or take payment breaks?
You might not have much control over the total length of mortgage you’re offered. This is because it has a lot to do with the price of the property you’re buying, the size of your deposit, how much you can afford to repay each month and your age.
But if you’re allowed, and can afford, to make overpayments, this can save you a lot of money.
Not all mortgages allow you to overpay. And if they do, there’s usually a cap on how much you can overpay every year.
Find out more in our guide Should you pay off your mortgage early?
Some lenders allow you to underpay or even take a short mortgage holiday where you don’t have to repay any money at all. Whether these features are available to you will depend on the mortgage terms and conditions, as well as your financial circumstances.
Learn more in our guide to mortgage payment holidays
6. Do you want to be able to move lenders, or remortgage, when you want?
Remortgaging to a better product can save you hundreds, and sometimes thousands, of pounds – but most lenders charge exit fees. If you’re on a fixed-rate deal, early repayment fees can be high.
If you’d like to have this option, speak to your lender, or use a mortgage broker to help you find a mortgage where there are no exit fees, or where the exit fees are low.
Find out more in our guide Remortgaging to get the best deal
7. If interest rates rise, do you want to make sure you won’t pay interest above a certain rate?
Some mortgages come with a capped rate feature where the rate won’t rise above a certain level.
Read more in our guide on Understanding mortgage interest rates
8. Do you want to use your savings to help pay off your mortgage sooner?
You could use your savings to help you reduce your outstanding mortgage and pay less interest. If you want to do this, an offset mortgage will give you the most flexibility.
