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Getting a mortgage is among the biggest financial decisions you'll make in your lifetime, as you could still be paying it off for the next 25 or even 30 years.
Even a small decrease in your mortgage rate can save you hundreds — or potentially even thousands — of pounds in the long term, so it’s crucial that you find a good deal.
If you’re looking to get on the property ladder, but you’re not sure how to go about finding the best mortgage product, help is at hand. I've shared five tips to help you get the best deal, including tips on what to look for, and what you'll need to do to be accepted for a low-rate mortgage. Just read on to learn everything you'll need to know.
If you've been with your bank for a number of years, you may be tempted to go straight to them for a mortgage deal. But don’t assume that your bank will reward your loyalty by offering you a great deal right off the bat. While this may save time, it could mean you miss out on a wide range of cheaper deals with other lenders.
Your existing bank will only have a couple of different products and rates to choose from, so it helps to shop around. After all, you don't want to take out a mortgage with your current bank only to discover a rate which would have saved you more money afterwards.
There are plenty of resources and tools to help you look for a deal, so be sure to do your research: this guide to the best rates from Money Saving Expert will help you to find the best product for every budget and loan amount.
Given the cost of buying a home these days, saving a big deposit might sound easier said than done. But, making the largest deposit payment that you can afford really will make a difference in the long run. Mortgage rates drop as the deposit amount reaches tiered percentage thresholds, known as loan to value bands: as a rule of thumb, the higher the deposit, the lower the rates you'll pay.
If you think you could increase your savings to reach the next deposit band, the extra time spent saving up could be well worth it in the long term. So, if you've got a 9 per cent deposit saved, it could be worth trying to build it up to a 10 per cent figure, as this will open up a whole host of lower interest rates.
If you're struggling to find a good deal, or you're just not sure how all these different rates and products translate into real terms, it’s best to speak to a professional mortgage adviser. A broker will not only scour the market for the best deals, but they'll be able to advise you on what sort of mortgage could save you money in the long term, too. This way, you'll have greater peace of mind that the product you've chosen is the best one for you. And, as the potential savings you stand to make on your monthly payments are likely to offset the cost of any broker fees, it's a prudent investment in the long term.
A variable rate could potentially save you a fair amount of money, but you'll need to think carefully about how you would cope with an interest rate rise. Short term tracker mortgages can be much cheaper than fixed rate deals, but this can be a gamble, as banks and building societies could raise the rates at any time. If you think you're secure enough financially to cope with a potential rate-rise in the future, then it could be worth the risk. But, if you value stability and think it’s more important to know exactly how much your payments will be, it’s probably best to opt for a slightly more expensive fixed rate mortgage instead.
Your credit score tells prospective lenders how much of a borrowing risk you present, which is why having a good rating can boost your chances of getting a cheaper deal. A lender is more likely to offer you a better deal if they think you’re less likely to default on your payments, so it's only sensible to get your credit score in shape. To give yourself the best chance of being accepted, try to avoid applying for new credit cards, or payment plan contracts for products like mobile phones, in the run up to your application.
If your credit score is poor, see if there are ways to give it a boost: this guide from Money Facts should tell you everything you need to know. You'll also need to make sure that you can provide your lender with at least three months' worth of bank statements, so it pays to watch your spending and refrain from any big impulse buys.
Mortgage rates and deals can seem complicated, especially for first-time buyers. But, as long as you shop around, do your research, and work to save a large deposit, you stand every chance of finding a great deal — meaning you can get on the property ladder for the best possible price.
Matt Stevens is director of The Mortgage Genie.