How do I choose? How to formulate your mortgage strategy and how to make your choice

Choosing a mortgage may be the single most important decision concerning your personal finances. A disadvantageous mortgage could cost you tens of thousands of pounds over the course of the mortgage, costs that could arise from unnecessary high interest rates, the inability to change your lender, the type of mortgage or penalties and otherwise avoidable extensions of your mortgage.

Our most important and relevant advice to you is to be thoroughly informed and knowledgeable about mortgages and even become a mortgage connoisseur. All it takes is a day or two of reading through guides and lender websites and what you could save is tens of thousands of pounds in the long term.

Lets see what the steps of getting a mortgage would be:

Income and outgoings analysis

See what your actual yearly income is exactly, what your expenses are and see what portion of your free income you are willing to allocate to the payment of a mortgage.

Never exaggerate your financial capacity and if anything underestimate it. You can never know how your mortgage costs could rise and leave you incapable of paying your mortgage.

Because mortgages are usually for tens of years provision for the changes likely to take place in your life. Leave reserves for unforeseen events.

Overextending yourself now or in the future is the biggest danger.

See what you can spend now

Balance your finances and see what you have saved so far and what amount you have available to put down as a percentage of the intended purchase price. Remember that only a portion of your savings will be available to be used as a deposit since there are mortgage set-up costs and fees associated with buying property.

For more information on the initial fees please refer to our other guides.

Always leave a reserve of cash for unforeseen events.

Get knowledgeable

Learn about the options that are open to you. Read about each type of mortgage, pay attention to the advantages and disadvantages of each as they are explained.

Learn about the hidden traps and clauses of each mortgage as they might put you down when you least expect.

See what types of insurance are available and, depending on your lifestyle ,the level of security that you want and the associated expenses you can afford, decide on which insurance you wish to have, if any.

Pick out 2 or 3 general types of mortgage

Now that you know what mortgage options are available, pick out 2 or three types that you think would be suited for you.

When making your list of preferred mortgage types consider the following:

• The amount that you are willing to put down. (determines your LTV and has many implications)
  
  Put down as much as you can so interest rates will be more advantageous and you will not have to repay too much and have interest applied to it
  
  Please refer to our basic guide to see the implications of your LTV.


• The most advantageous interest rate (discounted, fixed or tracker)
  
  Never opt for a standard variable rate unless you absolutely have to.
  
  Please refer to our interest rate guide.


• The repayment method (regular repayment or interest-only)
  
  We do not recommend interest-only mortgages as provisions for the final capital sum repayment have high odds of not working out.
  
  Please refer to our full mortgage type guide.


• The tie-in clauses. (regular or extended)
  
  We recommend to have a tie-in clause as short as possible as it may be very profitable to change lenders once in a while.

Please read our remortgaging guides for the full story on changing lenders and the benefits of doing so.

Preliminary market survey

Once you have decided on the 2 or 3 mortgage types call a couple of mortgage providers and get quotes for the mortgages you want from each of them.

Instruct them not do a credit search on you for the initial quotation as these searches might be interpreted by other lenders as refusal that will weaken your standing.

Alternatively you could get quotations on-line.

Getting a mortgage in principle

After having the actual precise offers in front of you choose the one that is most advantageous to you and make contact with the lender in order to discuss all the details.

You do not have to sign anything but just make sure that the lender is wiling to give you the amount that you need knowing the particularities of your case and that you know all the conditions in detail and that you are ok with them.

This is called getting a mortgage in principle.

This may be done before you have chosen a property or after.

Choosing the property

Choose a property that is within your budget but one that you are satisfied with. Make sure that it is in a decent area and does not need major improvements as lenders may have a problem with that.

The actual mortgage and the purchase

Once you have decided on the property and the mortgage, the only thing to do is put the two together and become a home owner.

Final Word

This guide is more or less for the regular borrower. For specific cases of individuals with more unusual circumstances we do provide case by case guides to getting a mortgage.

Please realize that a mistake made in the choice of mortgage could cost you tens of thousands of pounds. Be thoroughly informed and knowledgeable before committing to a mortgage. Please read as many of our many guides in order to avoid a mistake that you could regret for a good part of your life.