The following article was published by Money Saving Expert on 6th February 2023
Getting the right mortgage or remortgage deal can save you £100s each month. With rates higher than they have been for years, finding a deal that works for you can be tough – yet it remains as important as ever. This step-by-step guide shows how to find the best mortgage for you, where to look for a good mortgage broker and other key information.
Do a 10-min search for mortgage deals online
Before we begin searching for mortgage deals, we're assuming here that you've a basic understanding of mortgages and what kind of deal you're looking for.
Once you know what mortgage you want, whether you're going for a fixed, variable, discount or specialist mortgage, you need to start looking at what rates you can get. This will depend on the size of your deposit and the value of the property – the bigger your deposit compared to the value of the property (known as 'loan to value'), the better rates you'll be able to get.
But in starting your search for the best deal, the first thing you need to know is:
NEVER just go to your bank for a cheap deal
Your existing bank will only give you its range of deals, not the array of alternatives, meaning it's unlikely you'll stumble across the best one for you. But do check what it's offering as a starting point.
Benchmark a good mortgage rate using MSE's Best Buys tool
There are lots of mortgage comparison sites out there, but none guarantees to show you all the deals available. This is because the mortgage market is complicated and some deals are only available through certain brokers, making it very difficult for a comparison site to know about every single deal at all times. But Money Saving Expert's Mortgage Best Buys tool has all deals available direct, and most available to brokers, so it's a great place to start.
Don't use the APRC to compare – it's mostly meaningless
All lenders have to tell you their APRC – the effective averaged annual interest rate if you held your mortgage for the entire term (normally 25 years). This is rather annoying, as it's a rate that in most cases you'll never have to pay, so it's meaningless.
If you had a fixed rate at 3.49% for two years, and then the rate it reverted to afterwards was 4.74%, the APRC would be around 4.3%.
So why do we say it's mostly meaningless?
- You never pay 4.3%. It's an averaged rate over the entire term
- You're likely to remortgage long before the term ends
- The rate it reverts to (the standard variable rate) is likely to move anyway
What you really need to focus on is the initial rate, the fees and the rate it goes to once your deal has ended.
Now talk to a mortgage broker
Once you've benchmarked a good rate from our Mortgage Best Buys tool, it's time to see if a qualified mortgage broker can beat it.
Mortgage brokers scour the market to find you a good mortgage deal. By using one, you swiftly cover a huge slew of lenders, and get added clout with them to ease your acceptance as well as an extra layer of protection if things go wrong.
They will also be able to advise you about various homebuying schemes (such as Shared ownership) if you're eligible – tell your broker upfront if that's what you're looking for.
Qualified mortgage brokers are also worth their weight in gold, because they know key details about lenders' criteria. So they would know if the lender you're thinking of doesn't lend on properties above shops, or in council blocks – so they'd be able to recommend a different lender that does.
But, the key is to find a broker you're comfortable with. The estate agents you meet when house hunting will often recommend brokers. They may even work from the same office.
Ask friends who've moved for recommendations – many local brokers are fantastic. The aim's to find you the best broker for the lowest possible price. Not all brokers are the same. Some are limited in what they can offer you.
Here are the three crucial questions to ask brokers...
1. Can you get me a mortgage from any UK lender, right now?
This finds out if your broker can source you ANY UK mortgage. Not all can so it's important to know which you're dealing with. Here are some of the possible answers:
- 'No.' Some brokers are tied to one lender or operate off a small panel of lenders, so they search fewer deals. This makes it simpler and cheaper for them to operate.
- 'We check all products available to brokers.' The key point to note here is the last phrase – available to brokers. This used to be called 'whole of market'. Many of these brokers will exclude lenders and products which are only offered directly to the public, mainly as they won't receive a commission. On top, they may not be able to submit an application on your behalf.
- 'We check all lenders.' Some brokers do check lenders' direct-only deals too. However, they are more likely to charge a fee. In reality, it's unlikely a broker could guarantee you access to EVERY mortgage, as exclusive deals can be arranged between lenders and brokers (and clubs that brokers can join).
Just be clear on what your broker is offering. Weigh up the need to check every deal, your willingness to do some legwork yourself, and if you're happy paying a broker fee. Once you've found a broker you're happy with, you need to ask them the next questions to find out if they're the best broker for you.
2. Do you charge a fee?
This tells you how the broker makes their money from your mortgage deal. Brokers have two possible sources of income, which are:
- Commission. Almost all lenders pay brokers what's called a 'procuration fee' of roughly 0.35% of the transaction (£350 per £100,000). This is a commission based on your loan size – and doesn't affect the cost of your mortgage. They are obliged to tell you the exact amount they'll be paid before you apply. You can find this info alongside the 'Key Facts Illustration', which they must provide before you apply.
- Fees. Brokers may also charge you a fee directly. This might be on top of the commission, or instead of it (in other words, they charge a fee and refund you the commission). If they offer you the choice between fee or commission, then they can call themselves 'independent'. If they don't, they can't – which is a bit confusing.No reputable broker should charge more than around 1% of the mortgage value, even for customers with a poor credit rating. If yours charges more, walk away. Fees can be charged at any point in the process, providing you're told about them at the outset. Yet avoid using any broker who charges you big fees before completion. If the purchase falls through, you'll probably still have to pay.
3. Are you qualified?
You need to find out whether a broker is qualified to advise you. Make sure you're getting advice from a qualified mortgage adviser (the most recognised qualification is called CeMAP). Your broker should assess your needs and eligibility before recommending the most suitable product for you. This route also offers the most protection for you as a consumer.
If the advice turns out to be wrong, the Financial Ombudsman will be able to investigate any wrongdoing. If you chose a product from an information-only service, you'd have no comeback if you made the wrong choice.
Check mortgage paperwork
You could start a library out of the amount of paperwork you get sent when you take out a mortgage or remortgage. The main documents you need to be aware of are:
Key Facts Illustration
The Key Facts Illustration does what it says on the tin. It gives you the 'key facts' about the mortgage product, not all of them, but all the main ones. You should be given one of these before you make an application and you should check through carefully. Here's what to look out for:
- Does it have the Key Facts logo on it?
- Does it have the correct date on it?
- Does it have your name on it?
- Does it state who has created it? This will be your broker's details, or the lender if you've gone direct.
- Does it say if you've been recommended the product?
If all of the information's in there, file the illustration and keep it. If some of this information's missing, ask the lender or broker for a new one. In the event you ever have a disagreement with your lender, this document is a crucial piece of evidence that proves what you were recommended, by who and when. Your lender won't keep a copy forever, so keep it somewhere safe as it could be years before you need it again.
The mortgage offer
Once you've successfully applied for a mortgage, you'll be sent a mortgage offer by the lender. This gives ALL the facts about the mortgage and the conditions on the loan that you are agreeing to.
It's a bit more reading, but it's massively important you read through it and check every detail is 100% accurate. Be sure to look for:
- Mis-spelled names or incorrect loan figures. This could stop the mortgage at the very last minute, resulting in delays, additional expense, jeopardising the purchase and even more scarily, losing the mortgage offer completely.
- Anything unexpected, particularly info that contradicts your Key Facts Illustration. Pay particular close attention to fees, early repayment charges and the conditions you need to meet to complete (as it's your solicitor's job to check you've met these before the money can be drawn down).
Your broker should also check the mortgage offer, but don't rely on that. If you were to disagree on a point later down the line, it could be very difficult to win the argument if you've signed the document accepting the conditions.
DB Roberts work with Award Winning Mortgage Advice Bureau, who have access to over 12,000 mortgages from 90+ lenders and have advisors in our offices ready to help you.If you would like to book an appointment to discuss what deals they can find you, contact us and we will get you booked in for a chat!
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