How to Secure the Best Mortgage Rate for You

2024-03-28

Securing the right mortgage is, of course, hugely important and will make a real difference to your financial well-being for years to come. However, with so many options available, making the right choice for you can be a daunting prospect, especially for first-time buyers. The good news is that by doing your research, choosing a mortgage specific to your needs is, in many ways, an easily achievable goal. Here, we’re going to look at a few of the factors involved, so you get the best deal possible…

How Much Can You Borrow?

Typically, the average mortgage lender will provide between four or five times your individual income, or three to four times a joint income if you’re applying with someone else. Each lender will have their own way of doing things and that’ll affect the amount you’re able to borrow. Any debt you’ve already accrued - for instance on credit cards or other loans - may ultimately mean being able to borrow less. Knowing how much your able to pay each month is certainly something you want to take into account, so as to avoid leaving yourself unable to afford other important lifestyle options, like holidays, a new car or enjoying your local restaurants.

How Big is Your Deposit?

The simple fact is, the bigger your deposit the less you’ll have to borrow and the easier it’ll be to qualify for a lower mortgage rate. It’s worth remembering, though, that your deposit is only one aspect of your application your lender will take into account. Other factors they’ll look at are your income, credit history and the details of any property you’re looking at. Unsurprisingly, your lender will want to know you can afford monthly payments. But the bigger your deposit, the more reassured they’ll be, and it will undoubtedly boost your overall purchasing power going forwards.

Repayment or Interest Only?

A repayment mortgage means monthly payments that include both interest and a portion of the borrowed amount. As the debt is paid the interest goes down and you’ll get closer and closer to paying off your mortgage. Conversely, an interest only mortgage means monthly payments are lower, as they only cover the interest on the loan. Traditionally, first-time buyers are offered an interest only mortgage, as monthly payments are more affordable and a property transition in the first few years of ownership is much more achievable.

Fixed or Variable Rate?

A fixed-rate mortgage means your monthly payments are the same for the duration of your mortgage deal. If interest rates fall you won’t benefit, but you have the safety of knowing that if they increase yours they will always stay the same. Borrowers can rely on a level of stability, which makes a real difference when budgeting and means being protected from interest rate fluctuations. A variable rate, however, offers more flexibility, allowing you to switch deals if and when different rates enter the market. If monthly rates do increase, however, monthly payments also go up, which will impact your budget.

Remember to Remortgage

If you have a mortgage on a fixed rate or discount rate that’s structured to last over three or five years, it’s often a good idea to remortgage by the end of that promotional period. Remortgaging can provide a variety of benefits, including saving on monthly bills, giving yourself a payments holiday, or simply getting yourself a better rate overall. It also means you can borrow more, providing more funding for those times in life when that’s needed. Working with a new lender might be the answer, but it’s important to do your research and see what they can offer before you make the switch.