10 things to think about when choosing a mortgage

With rising household bills, switching your mortgage could be one way to save some cash.

With rising household bills, switching your mortgage could be one way to save some cash. - Credit: Alamy/PA

A spate of mortgage price wars means there are currently many low rates to choose from. 

In fact, the number of deals with rates below 1 per cent has jumped by 400 per cent since June, according to MoneySuperMarket. 

Here are 10 tips from the price comparison site to help navigate the mortgage maze…

1. Understand your budget

Get ahead by working out your budget. List all your monthly expenses and see what’s left over. Remember, it’s always better to have some money left over for unexpected costs.

2. Decide which type of mortgage you want

Do your research so you know what kind of mortgage will best suit your needs. 

Do your research so you know what kind of mortgage will best suit your needs. - Credit: Alamy/PA

With a fixed rate, your monthly repayments remain the same for the length of the deal, which can help with budgeting. With variable rates, your monthly repayments may change according to what happens to interest rates.

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3. Compare the whole deal

Don’t just look at the rate – factor in any mortgage fees or early repayment charges as well.

4. Consider speaking to a mortgage broker

MoneySuperMarket has a guide on mortgage advice on their website (www.moneysupermarket.com/mortgages/mortgage-advice).

5. Get your paperwork ready

Make sure you have all relevant paperwork to hand before beginning the process. 

Make sure you have all relevant paperwork to hand before beginning the process. - Credit: Alamy/PA

Include bank statements and payslips, ID, proof of address, P60s and documents to prove any other income such as Child Benefit.

6. Your credit score matters

Before applying for a mortgage, get a copy of your credit report. If it isn’t looking that great, there may be simple ways to boost it. For example, check you are on the electoral roll and close down credit card accounts you no longer use.

7. Show consistency with your job

Lenders often like to see you’ve been with your employer for a decent length of time. It’s often a good idea to have been in your existing job for at least three to six months before applying.

8. Put down as big a deposit as you can

The more you can put down, the bigger the choice of mortgages you’ll have. Lenders reserve their best rates for those with hefty deposits.

9. Minimise your debts

Before you apply for a mortgage, try to reduce any debts you have – this will help demonstrate that you manage your money responsibly. It could also mean you can borrow more when it comes to a lender’s affordability calculations.

10. When re-mortgaging, consider your LTV

If you’re re-mortgaging, look carefully at your LTV or loan-to-value ratio. If you’re close to dropping into a lower threshold, consider whether you can pay a small lump sum to take you into the next threshold. This could make a range of new deals available to you with lower interest rates – potentially saving thousands over the term of your deal.

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