Broker or DIY

Choosing a mortgage is not the simplest task you`ll come across, so if you`re not sure what type of mortgage is best for you, then it`s probably worth enlisting the help of an independent financial adviser. Remember for most people their mortgage will be the biggest amount of money they will ever borrow, so it makes sense to ensure you get the deal that`s right for your circumstances.

What type of mortgage – fixed or variable?

There are a number of different mortgage types out there, however they will all be either fixed rate or a variable rate. Fixed rate products are more suitable for people who want the comfort of knowing that their monthly mortgage repayment will remain constant for the next few years. If you are operating on a tight budget the last thing you need is for your biggest monthly outgoing to it suddenly increase and put pressure on your finances. A variable rate mortgage, whether it is discounted or just standard variable rate (SVR) will allow you to take advantage of any reductions in interest rate, however you`ll be susceptible to rate rises too. However, if you have sufficient leeway in your monthly budget, this may well be the right option for you.

Understand the true cost of your mortgage

The only way to compare mortgages to find out which is the cheapest product is to look at the total cost figure. A search on moneynet.co.uk mortgage page LINK will show you the total cost of a mortgage over the term that you are looking for, so if it`s a five year fixed rate mortgage that you are considering, take a look at the true cost over 5 years.

Watch out for extended tie ins

If you sign up for a fixed rate mortgage or a discounted rate mortgage that lasts for say 3 or 5 years, ensure that you are not tied into the lender for longer than the term of your preferential deal.

Percentage fees can be deceptive

When you`re searching for a mortgage, be careful with products that show the fee as a percentage rather than a fixed amount. Whilst a fee of 2% doesn`t sound that bad in isolation, if you`re looking at a mortgage of £150,000 this means your fee will be a whopping £3,000, so be sure you do your sums.

Higher lending charges

If you are borrowing a high percentage of the value of your property you may find that some lenders will impose a Higher Lending Charge (HLC). These vary from provider to provider but can amount to you paying a premium of up to 10% of the value of your mortgage. Not all lenders will charge a HLC, so make sure you shop around.