Finding The Right Mortgage

You’ve done the research, visited the local estate agents, gone through the homebuyer guide, researched your property online at a website like Fish4 and looked at financial advice on one of the many websites out there and eventually found that dream home.

All along you’ve had a rough idea of the sort of lending possibilities that you might be entitled to. You’ve taken an overview of the lending market, considered your income, budgeted for expenditure and calculated a figure that you should be able to manage.

Time now for the real work to begin; take some professional advice to secure the best mortgage deal. If you haven’t done so already it’s time to pay a visit to a mortgage expert, and it’s certainly worth choosing a reputable supplier of mortgages, such as NatWest, and use their expertise to help identify a package that your individual requirements.

You will be presented with a range of mortgage types:

The standard variable rate (SVR) mortgage - a rate above the Bank of England base rate, which the lender can change at any time.

Discount mortgages offer a percentage off the lender's SVR for a set period, usually between one and five years. As the SVR moves, so does the pay rate on a discount mortgage, so you need to be able to cope if your monthly repayments increase.

Tracker mortgage - this also has a variable rate linked to the Bank of England base rate. All well and good when rates are going down, but when rates rise so will your mortgage repayments.

Fixed-rate mortgages allow you to fix the rate of interest you pay on your loan for a set period of time, usually between one and five years, although longer term fixes are available. This is worth considering if you are pushing your limits to afford a property, as your repayments are set during the fixed-rate period. Fixed-rate mortgages can save you money if interest rates are rising, but if the base rate falls you can end up paying more than borrowers on variable rate deals.

If you’re looking to make a property purchase as an investment, because you feel that the equity has good potential to growth, then you should consider a buy to let mortgage. These are specifically tailored to the needs of landlords with tenants living in their property. See Alliance and Leicester for buy to let mortgages.

You will want a mortgage that leaves you comfortable with the repayment type. A repayment mortgage ensures both the interest and capital is repaid to the lender guaranteeing you will have paid off the debt at the end of the mortgage term and you will own the house outright. With an interest only mortgage you repay just the interest incurred on your borrowing and will need to make other arrangements to settle the capital sum upon completion of the term – perhaps from an inheritance or money built up in a separate investment.

The repayment timescale is also an important consideration. Normally a mortgage will run for 25 years but you may prefer an option that allows you to overpay by any amount without penalty, including redeeming the loan or to take payment holidays or underpay providing you have overpaid enough in advance.

Some mortgages even allow you to borrow back on the mortgage (or drawdown) without charging. Most lenders apply early redemption charges during a fixed or discount period. This can make it costly to move your mortgage during that time.

It's the biggest loan for the most important purchase that you're ever likely to make so do seek advice and take time to match the most suitable mortgage to your particular needs.