How to choose a mortgage in the UK and what to consider?

If you are reading this article, you are probably planning to take out a mortgage and buy your own dream home. This is a very serious decision, so before you decide on a particular financial product, it is worth taking some time to analyse. Of course, the help of a mortgage broker will make this task much easier for you, but it’s worth identifying your preferences at the outset to let your adviser know what is particularly important to you. We encourage you to read on, and also to contact our team :)

The ideal mortgage, meaning what kind of mortgage?

The ideal mortgage is one that suits your needs.

If you are reading this article, you are probably planning to take out a mortgage and buy your own dream home. This is a very serious decision, so before you decide on a particular financial product, it is worth taking some time to analyse. Of course, the help of a mortgage broker will make this task much easier for you, but it’s worth identifying your preferences at the outset to let your adviser know what is particularly important to you. We encourage you to read on, and also to contact our team :)

This is only possible if your mortgage adviser takes into account all your requirements, for example, in terms of the amount of the instalment, additional fees or your own contribution. In theory, you could do this yourself, but it will be extremely time-consuming - Extend Finance compares offers from around 200 lenders across the UK. Quite a lot of offers, right? Let us now turn to the factors that influence whether your mortgage will be a good fit.

Deposit

Let’s start with the most frequently mentioned criterion, which is the down payment. Most banks currently offer loans with a deposit of 5% of the property value or higher, with the interest rate depending on the amount of cash you are able to pay yourself. For this reason, many people opt for a higher down payment of 10%.

Although it should be mentioned that loans without a down payment and intermediate solutions are already available on the market, their availability is limited. Banks require their customers to make a deposit for a reason—this way, they protect themselves against reckless customers who could affect their financial liquidity.

If you already have a deposit of 5% of the property value and are wondering whether it is worth saving another 5%, be sure to contact us. Your customer advisor will provide you with realistic calculations so that you can make an informed and safe decision.

Creditworthiness

When applying for a mortgage at different banks, you have to take into account the often significant differences in calculated creditworthiness. While the general rule is that you can borrow approximately 4.5 times your annual income, there are often exceptions. For example, banks such asHodge, Atom Bank and Chorley Building Society lend up to 6 times the borrower’s annual income. However, it should be clearly stated that these institutions are not open to everyone and often require a high income, for example, above £75,000 per annum.

Fortunately, our advisors always check your creditworthiness during the initial consultation, so you don’t have to ask about it. Based on your financial situation, we will present you with at least a few alternative offers – some lenders will be willing to lend you more, while others will do so cheaper or faster. Differences also arise when estimating income, as some banks do not take overtime into account at all or underestimate the affordability of self-employed people.

Type of Interest Rare

Fixed or variable rates? That’s the question!

One of Extend Finance’s employees, 2023

The above quote is humorous, but it is a question that every borrower should ask themselves. Although the vast majority of mortgages in the UK have fixed interest rates, tracker products are currently being repaid by around 591,000 families (more than 7 million households have fixed-rate mortgages).

Naturally, it is very rare for us to participate in the conclusion of a variable-rate loan, but the decision is always up to the customer. When deciding on a fixed-rate mortgage, you also have several options to choose from. The shortest interest rate freeze period is currently 2 years, but you can sign such an agreement for 5 years. Of course, your broker will advise you on this, but it is worth keeping this issue in mind.

What is worth choosing in 2025? Both variable-rate loans (the probability of interest rates falling is very high) and fixed-rate loans make sense, but for a period not exceeding 2 years. Currently, taking out a fixed-rate loan for a period of 5 years is, in our opinion, completely pointless.

Additional charges and bonuses

Each bank imposes a set of fees that can determine the final cost-effectiveness of a particular solution. For example, the application fee can be as high as £1,500 and it’s not uncommon for a property valuation to cost upwards of £500. You also need to factor in the cost of a building survey, which is not cheap either. The cost of buying a property in the UK can be very high, so at the stage of choosing a mortgage, it’s worth thinking carefully about what offer actually works for you. If you’re on a tight budget, it’s worth limiting your initial fees as much as possible.Early repayment

Early repayment

Just because you’re taking out a mortgage for 25 years doesn’t yet mean you won’t be able to pay it off sooner. If you’re young and expect your earnings to increase, it’s essential to talk to our adviser about your options for paying off your mortgage early. Virtually every UK lender introduces an annual amount limit - once you exceed this, overpayment is still possible, but at an additional cost - Early Repayment Charge.

Type of lender

Few people realise how important the size of the bank (or building society) from which they take out a mortgage is. Of course, most of the time it is the interest rate that matters most, but from time to time we get customers with unusual needs, for example:

• has multiple sources of income, combining, for example, profits from cryptocurrency investments with performing small jobs for various companies;

• has found a great property but needs to complete the transaction within 10 weeks;

• wants to borrow money for a long time but pay off the loan quickly.

In such situations, it is worth paying attention to smaller lenders. Although a mortgage granted by a large bank will often be slightly cheaper, the offers of these institutions are very standardised. It is also easier to negotiate the terms of the agreement when you come to a company with only a few branches.

However, it is worth noting that small lending institutions sometimes have problems processing all the applications they receive. When many people want to take out a mortgage at an institution that employs only one or two analysts, the waiting time for a decision is greatly extended. This is a big problem if you have just found a bargain.

Summary

We hope to meet you soon to discuss your home financing options. A mortgage is a serious commitment and there is no room for carelessness or rash decisions. However, we believe that by choosing to work with Extend Finance, you will find a product that fits your needs and provides you with security. Don’t wait, take care of your finances today and make an appointment for a consultation!