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5 top mortgage tips from our expert advisers

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 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

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More from Which? Mortgage Advisers

Cashback offers are no doubt appealing when you’re looking for all the help you can get to afford your dream home – but cashback mortgages don’t always offer the best value. The key thing is to make sure that you don’t choose a mortgage based on cashback alone. Some cashback mortgages leave you paying much more in interest than you would if you had chosen the best deal on the market for your circumstances. Instead you should treat cashback mortgages like any other deal, and compare the total overall cost including any arrangement and booking fees, not just headline interest rates and cashback amounts.

If you have a tracker mortgage, your interest rate will probably be directly pegged to changes in the Bank rate. But other mortgage rates are only loosely affected by changes in the Bank rate. This is one of the key factors you should consider when deciding whether to choose a fixed or variable rate mortgage.

The Bank of England rate is merely the overnight interest rate that banks would pay to borrow from the Bank of England. However, the rate at which banks lend to their customers will depend on a number of factors, such as the interest rates that banks charge each other, and the rates that they are paying on their customers’ savings accounts.

Hence, if the Bank of England rate starts to rise, it doesn’t necessarily mean that new mortgage rates will be higher. However, anyone who has an existing tracker mortgage which is linked to the Bank of England rate would see their monthly repayments rise immediately.

A standard variable rate mortgage (also known as an SVR or reversion rate mortgage) is a type of variable rate mortgage. The SVR is a lender’s ‘default’ rate – without any limited-term deals or discounts attached.

When a fixed, tracker or discount mortgage deal comes to an end, you will usually be transferred automatically onto your lender’s SVR.

It can be risky to stay on your lender’s standard variable rate mortgage. A lender can raise or lower its SVR at any time – and as a borrower you have no control over what happens to it. Standard variable rates tend to be influenced by changes in the level of the Bank of England’s base rate. However, a lender may also decide to change its SVR while the base rate remains unchanged.

If you are on a tight budget and relying on your SVR to remain low, you’re in a very vulnerable position. In this case, it is very important you try to remortgage onto a fixed rate deal (which offers rate stability) before it’s too late.

For more information on the pros and cons of standard variable rate mortgages give our experts a call and they can advise on the best option for your circumstance.

With a fixed rate mortgage, the interest rate stays the same for a set period of time. This means that for every month during this set period, your mortgage repayments will remain the same, even if there are changes with changes to the Bank of England base rate, or your lenders’ standard variable rate (SVR).The term of a fixed rate mortgage usually lasts between two to five years, but can be much longer. When this period comes to an end, your lender will typically transfer you automatically onto its SVR.

For more information on the pros and cons of fixed rate mortgages give our experts a call and they can advise on the best option for your circumstance.

Deciding whether to buy now with a smaller deposit or save up for longer to secure a better mortgage deal is difficult. The housing market changes all the time and the cost of renting or buying could get cheaper or more expensive over the next few years. So, there is no clear cut right or wrong answer.

The main thing to consider is affordability – would you comfortably be able to afford any mortgage repayments? And, could you still afford your mortgage repayments if your interest rate increased? Our mortgage repayments calculator can help you to figure this out. If you can answer yes to both of these questions, then buying a house could be a good option for you.

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