Guide to getting a Mortgage

How do I start?

Mortgages are big business and the market is very competitive. Banks, building societies, all offer them. This is good news for you but means shopping around is crucial.

How Much can I Borrow?

The amount you will be able to borrow is at the discretion of the lender. Some lenders are a little more generous with their loans. As a rule of thumb the following guidelines apply.
If you are buying property on your own you could borrow up to 3.25 times your earnings.
If you are buying property with someone else you could borrow up to 4 times your earnings.

How do I compare deals?

The range of deals on offer- variable, discount and fixed rates- can all be confusing at first.
The first thing to look at is the interest rate on the loan, obviously the lower the rate the cheaper the money. However be warned like anything if it sounds too good to be true have a closer look. Deals with lower rates may hide higher rates after a ‘honeymoon’ period plus expensive in and out fee’s. The best deals offer a good rate , the freedom to move to a different lender without too much cost and low set up fee’s.

Repayment or Interest Only?

There are two types of mortgages
Principal and Interest
Interest Only

A P&I payment is the most straight forward and beneficial to you. Each week, fortnight or month you make one repayment that pays the interest as well as some of the debt. As long as you keep repaying that amount you are guaranteed to have paid off all the debt in the agreed term.

Interest Only

Borrowers pay off only the interest component every month, so borrowers need to be aware of how they will pay the capital eventually. This type of repayment is popular with investors as they usually sell their properties and clear the debt. This option is also good if for a period of the loan you need to lower your repayments you can.

Do I need a Mortgage Broker?

You do not need one, but they can prove to be extremely useful. The market is so competitive that there is a bewildering array of deals that are continuously coming out to beat the last. A broker can lead you through the maze and they will advise on the best deal for you, and do most of the dreaded paperwork for you. They will in the end save you time and money as nearly all brokers do not charge a fee as they get paid by the lenders.

How long should my mortgage be?

Most mortgages are between 25-30yrs. The longer the loan runs the cheaper the repayments, but the more you will end up paying. If you can afford to shorten the term the repayments will be higher, but you will finish with your debt sooner. Also by shortening the term you will save thousands in interest. Some lenders have now extended into 40 yr loan terms, borrowers need to be careful when choosing these. Borrowers need to sit down and think what it is they want, lower repayments, selling the property anyway after a few years or wishing to live there and own it eventually.
You can see for yourself what a difference it can make to the cost of your home by using our calculators on this site.

Should I Refinance?

Probably. Far too many people stick with one mortgage provider. It seems like after most people get their loan they just make the repayments and forget all about it. In recent surveys the majority of home owners did not even know what interest rate they were on. It definitely pays to have a look around at what the current rates are and see if yours measures up.
Mortgage brokers are a good idea when refinancing as they can advise you on the costs if you need to change lenders. Sometimes it can be too costly to move lenders other times it can be well worth it. Ask your broker to do a loan check up for you.