5 top mortgage tips from our expert advisers
5 top tips to avoid common mortgage application mistakes
1. Check your credit report
Even the most minor error on your credit report could stand in the way of you getting a mortgage, or mean that some of the better deals in the market aren’t available. For example, if you are still financially linked to previous housemates who have a low credit rating, this could affect your ability to obtain credit no matter how good your credit history is.
Because different lenders use different credit reference agencies it’s important to check your score against all three: Callcredit, Equifax and Experian. Each of these currently offers free online credit reports but only if you take out a free trial – so you’d need to remember to cancel your membership at the end of the trial period to avoid paying for them.
However, under the Consumer Credit Act you have a right to obtain your full statutory credit report at a cost of £2 per credit reference agency – once you have done this you can check for any errors and request that the agency corrects them.
2. Consider the full cost
Typically, mortgage products are made up of an initial low rate of interest generally lasting two, three or five years. This is then followed by a higher standard variable rate of interest, which lasts for the rest of the mortgage term.
It can be easy to fall into the trap of selecting a mortgage purely based on the initial incentivised interest rate on offer, but by doing this you might pay more overall. When choosing a mortgage it’s therefore important to factor in the total cost, taking into account both the rate of interest payable during any incentivised period and the total amount of fees payable.
Also, think about what will happen at the end of that incentivised period. Keep one eye on the standard variable rate, as it might not be guaranteed that you’ll be able to remortgage at the end of your deal.
Our team here at Which? Mortgage Advisers can guide you through incentivised rate periods and which product is right for you, the total amount of fees you’d pay to secure a mortgage and how standard variable rates can impact upon the cost of your mortgage. Plus your initial consultation call with us is completely free.
3. Get a decent deposit
Lenders calculate how much interest they will charge based on loan-to-value, or LTV, ratio. The lower the LTV, the lower the rate of interest. If, for example, you are buying a £200,000 property with a £10,000 deposit, this would equate to 5% of the property’s value, giving you a LTV of 95%.
LTVs are usually calculated in thresholds of 5%, with the best deals being reserved for those with the biggest deposits. As the pricing difference between thresholds can be substantial – for example, the difference between a 5% and 10% deposit can be as much as 2% – if you are close to a threshold it might be worth trying to save up until you reach it.
4. Shop around
Many of us stick with the same bank for years, and it can be tempting to just go for a mortgage directly with them without shopping around. Though the deal your bank is offering could be the one for you, it really pays to check it against other deals in the market to see how they compare. You can do this by contacting several different lenders directly, or speaking to a mortgage broker.
Mortgage brokers differ widely in the service they offer, and it’s important to ask whether they’re independent, if they’re tied to a particular lender or panel of lenders, and if they’re able to compare direct deals (ie deals that can only be taken out by the borrower, rather than through a mortgage broker).
Which? Mortgage Advisers compares both direct and broker-only deals and searches more than 9,000 mortgages. And, as you would expect from Which?, we offer independent and impartial advice to find the mortgage that is right for you.
5. Don’t forget the SVR
You may have already gone through the hurdle of getting a mortgage and have been on a fixed-rate deal, with the reassurance of knowing how much your mortgage payments will be each month. But, when your fixed-rate deal comes to an end you are likely to end up slipping onto your lender’s standard variable rate (SVR), which could mean that your repayments go up.
Before you come to the end of your fixed rate, speak to your lender to see what new deals its offering, and shop around to see whether switching to a new provider could save you money.
Going directly back to your lender could mean you get a new mortgage more quickly, but there’s a greater risk that you could end up with a mortgage that later becomes unaffordable, or isn’t right for you. An independent mortgage adviser that is regulated by the FCA will be able to give you advice based on your circumstances and talk through which deal would be best for you, based on a wide range of factors.
For more independent advice, speak to one of our expert Which? Mortgage advisers
- You’ll get a free initial consultation
- Our mortgage experts don’t work for commission
- We search thousands of mortgages to find the best deal for you
Call us free on 0800 316 4071