Choices You’ll Need To Make When Applying For A Mortgage

Applying for a mortgage is a huge deal for most people. It’s likely to be the biggest amount of credit you’ll ever take out by a long way. And it means you’re going to own a property. In the modern world that isn’t always an option for some people. And for some people, it’s just not the right decision for them. But I always knew I wanted to own a house and have something to call my own.

Having already owned a shared ownership flat I’d been through the process of applying for a mortgage. But doing it with Luke, for a house and totally on own has felt completely different. I would always recommend getting advice from a mortgage broker or advisor as that’s what they’re trained to do. Generally, they’ll get a commission for helping from the people you get your mortgage from. So for most, it won’t cost you a thing. But it can help you save loads and know you’ve made the right decision. Here are some of the choices you’ll need to make when applying for a mortgage.

Do you go for a fixed or tracker mortgage?

Now I’m going to preface this by saying I’m not a financial advisor/ money expert so always check these things with a professional. A fixed mortgage means you agree on a percentage interest rate at the start and you’re fixed to that rate for the time period you choose (generally 2, 3 or 5 years). This means your monthly payments will be the same every single month.

With a tracker mortgage your mortgage rate changes depending on what’s going on in the financial world. Some months you might do really well and get a great deal if it goes down. Or other months it might increase, so it’s a risk you’re taking. Therefore with a tracker option, your monthly payments change from month to month.

Personally, we went for a fixed mortgage as we found a great deal anyway. And I wanted to have a set price every month so I could plan and know how much our mortgage and outgoings would be.

When applying for a mortgage how long do you fix the deal for?

If you go for the fixed mortgage rate deal you’ll have an option to lock it in for 1, 2, 3 or 5 years. How long you go for will affect the monthly payments and generally the longer you choose the higher it will be. But this means you’re fixing it for that long a period as you never know what might happen in the market over that time.

Once your fixed period is up you’ll have to agree on a new mortgage offer. For us 1 and 2 years was a complete no-no as that amount of time will disappear before we know it. And we didn’t want to be thinking about going through the mortgage process again quite so quickly. With Brexit and having no idea what it would do for the country, we opted for the 5-year deal to lock in our rate for as long as possible. Plus as we found a great rate we wanted to keep it for as long as we could.

Can you afford to put down a little more, to begin with?

When we were applying for our mortgage we knew we had a £50K figure to use as the deposit. It’s a good amount was way over 10% of the property price which we thought was a win. But our mortgage advisor showed us that by just adding an extra £1,750 it could drop your mortgage rates quite significantly. Adding this extra value meant our deposit was a round figure of 15% and not 14.49%. And that solid figure made a huge difference to our rate and monthly payments.

Our mortgage advisor showed us the difference that small amount of money made and it was crazy. This is another great example of something we’d have never have thought about. But having a mortgage advisor that knew how it worked saved us so much money. So when you go into applying for a mortgage it’s worth thinking about whether you have any spare money that if needed you could add to your deposit.

What bank to go for?

This was something we didn’t know too much about and our mortgage advisor helped us with. Initially, we looked at what deal had the lowest interest rate coupled with the best value application fee. This would mean our monthly payments would be low but fixed for as long as possible. Yes, it is a lot of things to consider.

We ended up with TSB which is great as I’ve heard of them and they’re established. But mortgage advisors will always be honest and ours told us that their communication was good and they approved things quite quickly. Which when you’re buying a property is really good.

Accept when applying for a mortgage you’ll be paying an application cost

When you apply for a mortgage you generally pay an application cost of anything up to about £2k. This amount is one-off and can be added to the amount you borrow. Don’t always be put off by large application costs as if the rate is better you may end up paying less due to lower interest rates.

When I first saw the application costs I was blown away but they’re not as crazy as you think. Our mortgage lender provided a free basic survey/ valuation which would have cost us to do. So, in the end, it didn’t feel like it cost as much as we initially thought. And if it’s going to mean smaller monthly payments and less interest going to the bank it’s a win-win situation.

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