How to get the best mortgage deals

Signing up to a mortgage is a major part of buying a property, and typically you’ll be locked in to the mortgage for 2-5 years, so getting the best deal is critical. You may have done some initial research looking for the most suitable mortgage for your circumstances, however, with so many different options it can be quite the minefield. In this article we highlight some of the things to consider and what to look out for.

Check your credit score and try to improve the rating

Your credit score and report are a major part of getting a mortgage application agreed, and sometimes it can even effect the rate you get offered. Put simply, a credit score is a prediction of your credit behaviour, such as how likely you are to pay a loan back on time, based on information from your past credit reports. A lender will use your credit score information to measure how much risk you pose as a borrower, and if your credit score is low, this means the lender could charge you a higher rate of interest to cover this risk of you defaulting on your payments.  Conversely, a high credit score could be seen as an assurance you’re more likely to pay your debts on time, which may result in lenders offering you a better rate.

Proof of employment

As part of the mortgage application process, you will need to disclose your employment status and provide evidence (through pay slips) of how much you earn and when you started. The stability of your employment is another factors that lenders review in determining the risk you pose. Typically, lenders prefer if you are in a stable job with a long history of employment, as this will increase their confidence as it shows there is less risk of you getting into financial difficultly compared to say someone who is still in their probationary period or is self-employed.

Paying a larger deposit

In simple terms, the larger your deposit, the less you need to borrow from the lender. It goes without saying but if you are asking to borrow a smaller amount of money, then the mortgage lender will perceive you as less of a credit risk. Furthermore, lenders tend to offer the best deals to those who put down a 40% deposit or more (although, we know this is very unrealistic for most buyers). However, mortgages rates are effected by Loan-to-Value (LTV) rates, which essentially means, the lower the loan against the value of the house, the better the rate will be (i.e. if you need to borrow less money then you’ll get a better rate).

Example: LTV ratio is a system lenders use to compare a loan amount to the value of the asset purchased with the loan. For example, if a lender provides a loan worth half the value of the asset while the buyer covers the rest in cash, the LTV is 50%. If the property is worth £250,000 and the buyer has a deposit of £25,000, the loan-to-value rate will 90%.

Using comparison websites

We have also used price comparison websites whether it be for car insurance or hotels, and looking for a mortgage is no different. Although checking comparison websites can result in you discovering the best rates in a matter of minutes, sometimes your current bank will offer loyalty discounts if you’re already a customer, so it is worth enquiring directly with them too.

Although using comparison websites are helpful, unlike hotel prices, mortgages are much more complicated and a small difference in say your deposit size could result in a much better mortgage offer. Speaking with a mortgage adviser who deals with this on a day-to-day basis can make a big difference.

Should I use a mortgage advisor?

Entering and navigating the world of mortgages can be daunting and time consuming, and having someone there to support and guide you can make a big difference. A good mortgage adviser will obtain all of the relevant information about you, your finances, and your affordability and will do most of the leg work for you. Additionally, some mortgage advisors can negotiate a more favourable deal than you would otherwise get with a specific lender and may have access to broker-exclusive deals. Taking independent advice can make the different between a successful mortgage application and being rejected. It may also lead to a better mortgage arrangement, potentially saving you thousands of pounds.

Signing up to a mortgage is a massive commitment, and you do not want to make any mistakes or rush through the process. We have further advice relating to navigating the world of mortgages and recommend you give these a read. Our top tip however, is, if you are not confident in searching for a mortgage and want to ensure you are getting the best deal, you should consider speaking with a professional mortgage adviser.