TL;DR
In short
- Start with a payment you can afford and the full mortgage term, not a headline rate alone.
- A larger deposit usually means a lower loan-to-value (LTV), but eligibility and pricing still depend on the product and your circumstances.
- Compare repayment and interest-only carefully: interest-only leaves the capital to repay at the end.
- Choose a fixed or variable deal by considering payment certainty, possible rate changes, your plans and what happens when the deal ends.
- Compare fees, total payments and flexibility together, including early repayment charges and overpayment rules.
Choosing a mortgage is about more than finding the lowest initial rate. Consider what you can comfortably repay, how long you expect to keep the mortgage or live in the property, and how much flexibility you may need. A mortgage adviser can discuss your circumstances and the options they can access, subject to lender criteria. Ask about their lender and product range, and how their advice is paid for, before you decide.
What makes a mortgage a good fit?
A suitable mortgage fits your budget, borrowing needs and plans. Compare like-for-like options rather than focusing on one feature: the repayment method, term, deposit, rate type, fees and exit conditions can all affect the cost and flexibility of the loan.
Repayment method and mortgage term
With a capital-and-interest repayment mortgage, each monthly payment usually covers interest and repays some of the amount borrowed. With an interest-only mortgage, the capital normally remains outstanding at the end of the term, so you need a credible plan to repay it. MoneyHelper explains the difference between repayment options.
The mortgage term is the period over which the loan is scheduled to be repaid. It is different from an initial rate deal. On the same loan and interest-rate assumptions, a longer term can reduce monthly payments but increases the total interest paid. Consider whether payments would still be affordable if the term extends into retirement.
Deposit and LTV
Your deposit is the part of the purchase price you pay yourself. Loan-to-value (LTV) is the mortgage amount as a percentage of the property’s value: a larger deposit means a lower LTV. Products with a 5% deposit can be available, subject to applicant and property criteria. A larger deposit may improve the pricing available, but it does not guarantee a better outcome for every borrower.
Very low-deposit or no-deposit options are limited and conditional, and other purchase costs still need to be budgeted for. A smaller deposit can also leave less equity in the property if its value falls. Compare the savings needed for a larger deposit with your moving plans, costs and the options available to you.
Affordability and how much you can borrow
Lenders assess affordability using more than an income multiple. They may consider income, debts, regular spending, dependants, the proposed term, credit history and their own lending criteria. The evidence accepted and the treatment of income such as overtime, commission or self-employed earnings can differ between lenders. Our guide to mortgage affordability explains the principle in more detail.
Before making an application, check what information a lender or adviser needs and whether the monthly payment remains manageable if circumstances change. An affordability assessment is not simply a calculation of the largest amount you could borrow.
Fixed, tracker and other variable rates
A fixed rate applies for the agreed deal period, giving more certainty about the interest rate during that time. A tracker rate follows a stated reference rate plus or minus the lender’s margin, subject to the product terms; for example, some trackers have a minimum-rate collar. A discounted rate is a discount from the lender’s standard variable rate (SVR), which does not have to move in line with Bank Rate. Our guide to fixed and variable interest rates gives further context, while MoneyHelper’s overview of mortgage rate options explains these rate types.
When an introductory deal ends, the mortgage normally moves to the contractual reversion rate unless you arrange another deal. Two- and five-year periods are common examples, not universal limits. Review your options before the deal ends, taking account of payment certainty, your ability to absorb changes, planned moves, deal costs and any exit charges.
Fees, incentives and overall cost
Mortgage costs can include booking or application fees, arrangement or product fees, a lender valuation, adviser charges and legal costs. Some deals waive particular fees. If you add a fee to the mortgage, interest is usually charged on it as part of the loan. Check whether a fee is refundable and when it is payable.
A lender valuation is for the lender’s purposes and is different from a survey you may choose to commission. Not every buyer needs a new building survey; in Scotland, most marketed homes are sold with a Home Report, subject to exemptions. Include the separate costs of legal work and any survey in your budget, alongside the wider costs of buying a property.
Compare equivalent loan amounts and terms over the period you expect to keep the deal. Look at payments, fees, incentives and the remaining balance, as well as likely switching or exit costs. The APRC is an annualised comparison based on stated assumptions; it is useful context, but it is not a forecast of the rate you will pay or the only measure of value.
Early repayment and moving home
Check the individual mortgage offer for its overpayment allowance, how that allowance is calculated, when it resets, the period in which charges apply and the early repayment charge (ERC) schedule. Some products allow unlimited overpayments, while others may charge an ERC if you exceed an allowance, repay the mortgage in full or switch during a charge period. Read the terms alongside any early repayment charge guidance.
If you may move home, ask whether the deal is portable. Porting still requires lender approval and any additional borrowing may be on separate terms. These details can matter as much as the initial rate if your plans are likely to change.
Lender criteria and practical requirements
Compare lenders and products using criteria that relate to your situation: accepted income evidence, property criteria, deposit and LTV requirements, product flexibility, fees and current processing estimates. Processing estimates do not guarantee completion, which can also depend on valuation and legal work.
An adviser can help you understand the options available through their service, but lender decisions and product eligibility depend on the application and the lender’s current criteria. A mortgage is secured on your home, and missed repayments can put it at risk.
Summary
Take time to compare the whole mortgage, not just the initial monthly payment or rate. If you would like to discuss your circumstances and available options, contact Extend Finance for a consultation. Bring questions about the product range, fees, repayment plans and the flexibility you may need.
FAQ
Frequently asked questions
How much deposit do I need for a mortgage?
Some products are available with a 5% deposit, but eligibility depends on the applicant, property and lender criteria. A larger deposit lowers the LTV and may improve the pricing available, while other buying costs still need to be budgeted for.
How do lenders decide how much I can borrow?
Lenders assess affordability using income, debts, regular spending, dependants, the term, credit history and their own criteria. An income multiple is only one part of that assessment.
Should I choose a fixed or variable mortgage rate?
Choose based on the certainty you need, your ability to manage changing payments, your plans for the property and the deal’s fees and exit charges. Check what rate applies when the introductory deal ends.
How should I compare mortgage fees?
Compare equivalent loan amounts and terms using payments, booking or application fees, product fees, incentives and the remaining balance. Check whether fees can be added to the loan, whether they are refundable, and the likely cost of switching later.
What should I check about overpayments and the mortgage term?
Read the offer’s overpayment allowance and ERC schedule, including how and when the allowance applies. A longer repayment term can lower monthly payments but, on the same assumptions, increases total interest; consider affordability throughout the term.
