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

Jak wybrać kredyt hipoteczny w UK i czym się kierować?

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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.
The ideal mortgage is one that suits your needs.

Many of our customers are looking for the “cheapest mortgages“, or the “perfect mortgage“. Unfortunately, due to the diversity of the market and the many variable characteristics of borrowers (everyone is in a slightly different life situation), there is no universal product that we can recommend to all of you. It is also difficult to point to the cheapest mortgage, because the total cost of borrowing money depends on many factors, often factors that we cannot predict at all.

However, we can talk about a mortgage that is best suited to your specific needs. 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

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

Let’s start with the simplest, yet most important, aspect: the deposit. Although the market standard is 5% of the value of the property, the matter gets a little complicated. On the one hand, a mortgage with no down payment is available in the UK, which tempts with its apparent affordability. On the other hand, the interest rates on products with the same level of deposit can vary dramatically – it depends on the specific bank’s policy and assessment of your credit score.

A 5% deposit is not always the best choice – yes, it will take you less time to raise the money, but it will be at the expense of a higher interest rate. If possible, talk to your adviser at Extend Finance about a product with a 10% deposit. This way, you’ll hand over much less money to the bank.

Affordability

When applying for a mortgage with different banks, you often have to expect large differences in the calculated affordability. While the general rule of thumb is that you will borrow an amount of around 4.5 times your annual earnings, deviations are quite common. Fortunately, our advisers always check this parameter during the first conversation with clients, so you do not need to ask about it.

Remember that a mortgage from a bank with more liberal criteria may have slightly less favourable repayment terms. This means that a few months before you start preparing to buy a house, it is worth at least raising your earnings a little, for example with overtime. Every pound counts!

Type of Interest

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

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 every borrower should ask themselves. Although the vast majority of mortgages in the UK are fixed rate, tracker products are currently being repaid by around 850,000 people. It is very rare for us to participate in a mortgage with a variable rate, but the decision is always up to the customer.

When opting for a fixed-rate mortgage, you also have several options to choose from. The shortest interest freeze period is currently 2 years, but you can take out such a deal for 5 years. Your broker will, of course, advise you on this, but it is worth bearing in mind.

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.

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!

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Our team is here to assist you. Contact us by completing the form below.

Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

Extend Finance nor The Right Mortgage Limited can’t provide advice regarding Personal Pensions, Pension planning or investment planning advice. You must seek independent financial advice from a suitably qualified professional financial adviser who may charge you for advice.

Wills, Will writing, Trusts and Trust planning are not regulated by the Financial Conduct Authority.

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