How To Find The Right Mortgage For You
Finding a mortgage that works for you can be challenging, especially if you’re the type of person who’s new to the market. You don’t always know what to look for or which option you should pick.
Let’s be honest – finding a mortgage ranks somewhere between getting a root canal and doing your taxes on the fun scale. You’re dealing with massive amounts of money, confusing jargon that sounds like it was invented to make you feel stupid, and the constant nagging feeling that you’re about to make a terrible mistake that’ll haunt you for the next 30 years.
Yes, getting a mortgage is probably the biggest financial decision you’ll ever make, but it doesn’t have to be the scariest.
How to Find the Right Mortgage
If you’re in this situation, this guide is here to help. We run through some of the mortgages you might want to explore, so you can choose the one that’s right for you.
Assess Your Financial Situation
The first step is to look at your financial situation. You want to figure out what you can afford, and what’s going to work for you before getting a mortgage.
You’ll need to look at the following factors:
- Your credit score
- Income
- Expenses
- Debt-to-income ratio
Mortgage lenders will usually want to know all of these to see whether they think you’re suitable for a mortgage. If you have a problem with any of these factors, you may need to work on them and find ways to improve.
Your Credit Score: The Number That Rules Them All
Your credit score is like your financial report card, and mortgage lenders are the strict teachers who actually care about it. The higher your score, the better interest rates you’ll get offered. Even a difference of 0.5% might not sound like much, but over 30 years? That could be tens of thousands of pounds.
Check your credit score now – not the day before you apply for a mortgage. If it’s not great, you’ve got time to improve it.
Pay your bills on time, pay down credit card debt, and for the love of all that is holy, don’t open new credit accounts or make any major purchases while mortgage shopping.
Understand The Mortgages Available
You also want to take a look at the different kinds of mortgages available to figure out which is right for you. They’re not all the same, and you may be forced to choose specific mortgages, depending on what you want to do with the property.
Fixed Rate
For example, fixed-rate mortgages set a rate over a period of time, and it won’t usually change all that much.
A fixed-rate mortgage is like a Netflix subscription – you know exactly what you’re paying every month, no surprises. Your interest rate stays the same for the entire loan term, whether that’s 15, 20, or 30 years.
It’s predictable, stable, and boring in the best possible way. If you’re the type who likes to budget down to the penny, this is probably your jam.
Adjustable Rate
Adjustable-rate mortgages are different. These fluctuate with the underlying interest rate, determining what you pay.
They typically offer a lower initial rate for a set period (like 5, 7, or 10 years), then adjust based on market conditions. They can be great if you’re planning to move or refinance before the rate adjusts, but they’re definitely not for the faint of heart or those who lose sleep over financial uncertainty.
You can also get an expat buy to let mortgage if you’ve moved out of the country but still want to rent your home back home. These are handy if you’ve moved overseas but want to retain the option of going back to your old property in the future.
Compare Interest Rates
The next step, naturally, is to compare interest rates and see who’s offering the best deal. You will usually find substantial variation between providers.
These rates are important if you are getting a mortgage for a long period. The amount you pay will depend greatly on the actual rate.
You may want to bring down the true cost of the mortgage by reducing the term. With these, you pay more each year, but you avoid paying large amounts of interest.
Consider Your Down Payment
Next, you’ll want to consider your down payment. This determines how much money you put into the house.
The down payment should be around 20% typically, as this grants you access to the cheapest mortgages. You can go lower than this, but you will usually pay more in interest, which may not benefit you long-term.
You can make a smaller down payment if you want to move into a property quickly, but it is a good idea to overpay for the first couple of years. This way, you can reduce the total loan amount and increase your equity in the property, lowering your future costs further.
Get Pre-Approved
Don’t forget to get pre-approved for your mortgage. Having a mortgage offer in principle means that real estate owners are much more likely to entertain your offers.
Pre-approval also tells you exactly what you can afford, so you don’t waste time looking at houses outside your budget or, worse, fall in love with something you can’t have. It’s emotional protection as much as financial preparation.
The Term Game: 15 vs. 30 Years
The 30-year mortgage is the vanilla ice cream of home loans – it’s the most popular choice for a reason. Lower monthly payments mean you can either afford more house or have more money left over for, you know, actually living your life.
The downside? You’ll pay way more interest over the life of the loan, and you’ll be making payments until you’re ready for retirement (or actually in retirement, depending on when you buy).
A 15-year mortgage is like ripping off the band-aid – it hurts more at first (higher monthly payments), but it’s over quicker, and you’ll pay significantly less interest overall. If you can swing the higher payments without sacrificing your entire lifestyle or emergency fund, it’s worth considering.
Plus, there’s something deeply satisfying about owning your home outright before your kids finish high school.
Get Multiple Quotes (Seriously, Do It)
Would you buy the first car you test drive? Then why would you take the first mortgage you’re offered? Get quotes from at least three mortgage lenders – a bank, a credit union, and a mortgage broker.
They’ll all offer slightly different rates and terms, and those small differences add up to big money over time.
When you’re shopping, try to get all your quotes within a 45-day window. Multiple mortgage inquiries in a short period typically count as just one hit on your credit score – the credit bureaus understand you’re rate shopping, not going on a credit application spree.
Red Flags and Pitfalls to Avoid
If It Sounds Too Good to Be True…
Beware of teaser rates that sound amazing but adjust dramatically after a short period. Watch out for prepayment penalties that lock you into a bad deal.
Be skeptical of mortgage lenders who promise approval regardless of your credit or income. And run from anyone who suggests you fudge numbers on your application.
The Biggest House Syndrome
Just because you’re approved for a £500,000 mortgage doesn’t mean you should take it. Mortgage lenders calculate what you can afford based on your gross income and debts, but they don’t factor in your real life – your desire to travel, eat out occasionally, or save for retirement.
Figure out what you’re comfortable paying, not just what the bank says you can pay.
Adjustable Rate Anxiety
If you’re considering an ARM, be pessimistic in your planning. Assume rates will go up (they probably will). Calculate whether you could still afford the payment if rates hit the cap.
If the answer is no, stick with fixed-rate. Your future self will thank you.
How to Find the Right Mortgage, the Right Way
Finding the right mortgage isn’t about finding the perfect mortgage – that doesn’t exist. It’s about finding the right mortgage for your specific situation, goals, and comfort level.
Maybe that’s a 30-year fixed because you value predictability. Maybe it’s a fixed rate because you know you’ll move in five years.
The key is to educate yourself (congrats, you’re doing that right now), shop around (seriously, don’t skip this), and make a decision based on your actual life, not some theoretical ideal. Don’t let anyone pressure you into something you’re not comfortable with, whether that’s your real estate agent pushing you to bid higher or your parents insisting you need 20% down.
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