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Compare rates and lenders with Koodoo to find the right mortgage deal for you[1]
The right mortgage isn’t quite as simple as choosing the deal with the best interest rate. The type of mortgage that is right for you depends on your financial situation, your future plans and the type of property you’re looking to buy.
With a fixed rate mortgage, your repayments are guaranteed to stay the same for a set term, usually two or five years.
The advantage of a fixed interest rate is this security – knowing that your mortgage payments will stay the same for a certain length of time, which can make it easier to manage your budgets.
That certainty can come at a cost, as fixed rate mortgages tend to have higher interest rates than variable rate mortgages. This isn't always the case though.
The other main disadvantage of fixed rate mortgages is that you won’t benefit from a reduction in costs if interest rates fall.
If you’re on a variable rate mortgage, the interest rate charged on your mortgage can change, meaning so too can your monthly repayments. That can make it difficult to budget for your mortgage repayments.
Variable rate mortgages will generally change when the Bank of England changes its base rate.
Usually, interest rates and fees for variable mortgage deals are lower, at least initially, than fixed rates though if rates increase a variable mortgage may end up costing you more.
There are a few different types of variable rate mortgages:
An offset mortgage links your savings to your mortgage and 'offsets' the value of those savings against the mortgage balance.
In practice, this means you'll pay less interest on your mortgage. For example, if you had a mortgage of £100,000 and savings of £20,000, you’d only pay interest on £80,000 of your mortgage.
But it also means your actual savings won't earn any interest and you might not have unrestricted access to your money.
An offset mortgage can make sense when mortgage rates are high or savings rates are very low.
Your mortgage lender will look at your finances to work out what it believes you can afford to borrow. It’ll base this decision on:
To get an estimate of how much you could borrow and your repayments, try our mortgage calculator.
If you’re looking to buy a home, most lenders will expect you to have a deposit of at least 5%-10% of the property’s value.
A larger deposit will let you access better mortgage deals.
If you’re struggling to build a deposit, government schemes like Right to Buy can help you to buy a home with a smaller deposit.
There are also specific financial products designed to support buyers in building a deposit, like the Lifetime ISA. With a Lifetime ISA you can save up to £4,000 per year, which is then topped up by 25% by the government, on top of any interest you earn.
There are two different ways to pay for your mortgage – repayment or interest-only.
With a repayment mortgage, you’ll pay back what you’ve borrowed, plus any interest, over the term of your mortgage.
Each month, the size of your outstanding mortgage will get a bit smaller, until you’ve repaid the whole loan. At the end of the mortgage term, you’ll own your home outright.
Your monthly repayments will be higher with a repayment mortgage, since each month you are paying off both the capital you’ve borrowed and the interest charged on your loan.
On an interest-only mortgage, you only pay the interest that builds up on your mortgage each month. You pay nothing towards the capital (the amount you borrowed). This will make your monthly repayments lower.
At the end of your mortgage term, you’ll need to repay the capital. You’ll need a plan for how you’ll do this – separate investments, or simply selling the property.
Interest-only loans are more common for buy-to-let mortgages.
Some lenders offer mortgages specifically designed to support first-time buyers.
These mortgages are for those borrowers who have never owned or inherited residential property before.
You won’t qualify as a first-time buyer if you’ve ever owned a commercial property with living accommodation, or if you’re looking to buy a property with someone else who’s previously owned a home of their own.
Because these mortgages are aimed at first-time buyers, they are usually available for those with only a small deposit of around 5%.
Most mortgages offered by lenders are simply residential mortgages ‒ deals open to people looking to buy a property which they plan to live in.
You won’t be able to use these mortgages to purchase a property that you plan to let out.
Once you get to the end of your initial mortgage deal it’s generally a good idea to remortgage. This is where you move the loan to a new fixed or variable rate, rather than sitting on your lender’s SVR.
You can remortgage even if you are in the middle of a fixed period, though this will mean you incur early repayment charges (EPC).
Remortgaging can be a useful option too if you’re looking to borrow more money or increase your mortgage term.
If your mortgage is for a property that you plan to rent out to tenants, you’ll need a buy-to-let mortgage.
Interest rates and fees are usually higher than residential mortgages, and you may need previous experience of being a landlord to be eligible.
Get your details together before you start, so we can compare the options available to you. We’ll ask for things like:
Whether you’re a first-time buyer, moving to a new property or remortgaging your existing one
Your name, address, and whether you’re making a single or joint application
Whether it’s a new build, a house or a flat
Usually the value of the property you’re buying, minus your deposit. If you're not sure, you can give an estimate based on your budget
Your salary before tax, plus any extras like bonuses or overtime
Comparing mortgage deals isn’t the only way to find great rates. Here are five more tips to help you get the deal you want:
Lenders will check your credit history against their criteria when deciding how much to lend
A really simple but effective step towards improving your credit score
A bigger deposit means you won’t need to borrow as much and you’re likely to be offered better rates
Paying your bills regularly and on time will be reflected in your credit score and shows lenders you’re reliable
Use an eligibility checker to find out which mortgages you qualify for without affecting your credit score
It can take a while to build or repair your credit score. Mortgage lenders can check the last six years of your credit history, so it’s worth preparing early
If you have problems with your credit history, it can be harder to find a mortgage. But there are some lenders that will consider your application.
You might be asked to provide more evidence that you can afford repayments and you’ll be asked about your previous credit problems.
You’ll get a lump sum after completion, which can be great to pay off fees or buy essentials for your new home.
They don’t necessarily offer the best rate, and may come with larger fees, so compare and get advice on the overall cost.
Mortgages that let you put down a smaller deposit, such as 5%.
For really small or no-deposit mortgages, you might be limited to products like joint borrower sole proprietor, where a family member essentially borrows alongside you and commits to making repayments if you can’t.
If you're self-employed, you'll generally need to provide two to three years’ worth of accounts to prove you can afford a mortgage, though some specialist lenders will accept less.
Other than that, they’re the same as for employed applicants.
Lenders are less likely to lend on homes of non-traditional or unusual construction.
You might have to put down a larger deposit and you’ll probably have fewer deals to choose from.
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Page last reviewed: 14 September 2023
Page reviewed by: John Fitzsimons
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES
[1]For online mortgage comparison and advice Gocompare.com introduces customers to Koodoo which is the trading name of Mortgage Power Limited who are authorised and regulated by the Financial Conduct Authority (FRN 845978). Gocompare.com’s relationship with Koodoo is limited to that of a business partnership, no common ownership or control exists between us. Please note, we cannot be held responsible for the content of external websites and by using the links stated to access these separate websites you will be subject to the terms of use applying to those sites.