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Top-rated UK mortgage deals

With so many mortgages on the market, working out which one is right for you can be tricky and time-consuming. Here, we’ll consider what to look for to ensure you find the best mortgages in the UK for your needs and how to apply for one.

What should I look for in a mortgage?

Few mortgages are identical, and features vary according to the lender and the conditions they set out. The best mortgage for you will also depend on your own financial situation. But before you take the plunge, there are a few important factors you’ll need to consider before applying for one. Think about the following:

  • Affordability

Home ownership in the UK is a big deal and top of the list of priorities for a large proportion of the population, but that doesn’t mean taking out a mortgage right now is right for you. So, whether you’re a first-time buyer or looking to move somewhere bigger, think about whether you’re in a position to make mortgage repayments on top of bills and living expenses.

  • Type of mortgage

Make sure the mortgage you get suits your needs. Lenders often have a particular group of people in mind for the mortgage products they offer. For example: first-time buyers, buy-to-let landlords or existing homeowners looking to remortgage. Sticking to what applies to you should immediately narrow your search and make it easier to focus on what’s best for you.

  • Mortgage term

The mortgage term is simply the length of time you have the loan for. Typical loans last 25 years, but they can be shorter or longer than this. You don’t have to stick to the same mortgage deal for the whole term and you can switch to another lender if a better package comes along. If you do switch, there may be an exit fee but, in many cases, your new lender will foot the bill on your behalf.

  • Flexibility

Look for perks like mortgage holidays where you can defer or reduce repayments for a limited period of time. The option of a mortgage holiday can put your mind at rest but remember – you will need to pay back what you owe. In many cases, the outstanding payments will be added to the end of your term or spread across it (making your term longer or slightly more expensive). Another feature worth looking out for is the ability to overpay your mortgage without being penalised.

  • How interest is calculated

Your mortgage loan will include interest but how it’s calculated can affect what you pay monthly and over the life of the mortgage itself. Most lenders will offer a range of mortgages with different interest options – head over to our mortgages hub to see what they are.

How do you apply for a mortgage?

You can apply for a mortgage directly with a bank or building society, but they’ll only be able to offer you their own mortgage products. Alternatively, you can hire a mortgage broker or financial advisor who’ll be able to scour the entire market for suitable options.

If you choose to consult a broker or advisor, they should make it clear how much they charge and also if they’re on commission from any specific lenders, which could influence the deals they present to you.

Before you can begin your application, your broker, bank or building society will need to scope out your needs and stress-test your overall financial situation. This means assessing whether or not you can afford to pay back the mortgage in the event of something happening, for example, having a baby or taking redundancy. To do this, you’ll be expected to provide details about your salary – including any income you receive from pensions, dividends or freelance work – as well as your outgoings, such as rent, utility and credit card bills. You might also be asked what you spend on leisure activities like gym memberships or eating out.

The level of detail that lenders go into might feel intrusive, but it’s all about working out whether or not you can realistically pay back a mortgage on top of everything else. To support your application, you’ll be asked for certain documents which can include:

  • Proof of ID

A passport or photo driving licence is ideal.

  • Proof of address

This can include utility bills less than three months old.

  • Bank statements

You’ll need a minimum of three months’ worth and sometimes up to six months of statements.

  • Payslips

You’ll usually need a minimum of three payslips if you’re employed, while it’s also a good idea to have your P60 to hand. If you’re self-employed, you’ll need a breakdown of your accounts and tax assessments.

  • Bills

This includes any regular outgoings such as childcare costs or school fees, as well as utility and broadband bills and outstanding amounts on other loans.

Getting a mortgage in principle

After you’ve gathered all your documents and your potential lender is happy that you can afford the loan repayments, you can ask for a mortgage decision in principle. This is essentially a promise that your lender will stump up the money you need so long as the property you’re interested in passes their own valuation checks.

It’s worth knowing that getting a mortgage in principle will mean having your credit score checked, so it’s a good idea to only apply for one when you’re serious about buying a home.

A mortgage in principle is usually valid for six months and sometimes up to nine months, giving you ample time to search for a property.

Making a formal mortgage application

If you’ve found a home you want to buy and had your offer accepted, you can then formally apply for a mortgage through your lender or broker. All your paperwork will be given a final check while the lender carries out their own valuation on your potential new home to ensure it’s worth the amount suggested.

It can take a month or so for your mortgage to be formally approved, depending on how busy your lender is and whether or not they need more documentation from you.

How to increase your chances of mortgage approval

Mortgage approvals don’t just happen by chance. Successful applications are generally the ones that provide all the evidence needed for a lender to be confident about loaning you the money. Although the final decision will always rest with your lender, there are a few things you can do to boost the chances of approval – for instance:

  • Check your credit score and history

Make sure your report is accurate, as lenders will use it to work out how good you are at managing your money. A simple mistake like your name spelt incorrectly or a wrong address can have a negative effect on your overall report. You can give details of any mistakes to the credit reference agency that put the information together – there are three main agencies in the UK where you can check your details for free: Experian, Equifax and Trans Union.

  • Register to vote

Being registered to vote shows lenders you are who you say you are and confirms where you live.

  • Cut down on loan applications

Repeatedly applying for credit or having a payday loan serve as red flags to potential lenders and implies you’re struggling with money. If you want to apply for a mortgage, it’s best to hold off asking for a loan or credit for at least 12 months beforehand.

How much mortgage can you afford?

What you can afford comes down to your own financial circumstances, which is why your broker or lender will go through your income and expenditure with a fine-tooth comb.

Saving a decent deposit and lowering what’s called the loan to value rate (LTV) can also help. The LTV is simply the value of the house that is covered by the mortgage and is shown as a percentage. For example, if a house cost £250,000 and you had a 10% deposit, your LTV would be 90% because 90% of the house was paid for by the mortgage.

While 5% is typically the minimum deposit you’ll need, the more you can save, the better. A larger deposit means a lower LTV, which is likely to attract your lender’s best mortgage rate.

When you compare mortgage deals, you’ll come across something called the APRC, or annual percentage rate of charge. This is basically how much your mortgage will cost you and includes all the extra fees your lender might charge.

The APRC isn’t a perfect gauge as it assumes you’ll stick with the same mortgage for the full term, and it doesn’t factor in changes in interest rates or fee increases. Nevertheless, it can be a good indicator of value when you’re comparing loans for the first time.

What is the best mortgage for me?

The best mortgage for you will be one that’s affordable and helps you fulfil your home-buying goals. At the end of the day, it’s up to you to decide whether or not you’re in a good position to apply for a mortgage, but that’s something your broker, bank or building society will be able to advise you on.

If you are considering stepping on to or further up the property ladder, here’s some advice on how to save money for a house, what the benefits of buying are compared to renting and five home buying costs you might not have considered but should! You can also check out our new mortgage calculator

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