Cheap Mortgage Finding
By Lesley | Edited by Johanna Updated July 2015
Getting the right mortgage or remortgage deal can save you Ј100s each month. But it can be a nightmare knowing how to get it spot on.
Step 1: Know what type of mortgage you want
Now you're ready to get a mortgage, you need to go about it the right way. There are several things you need to do before you're ready to check out deals:
Have you decided whether you want a repayment or interest-only mortgage?
If you pick interest-only, you NEED a separate plan to pay off your debt, as your payments only cover the cost of the interest. A repayment mortgage, while it costs more each month, pays off the original debt too.
Unless you have a compelling reason, repayment is the way forward. It's also the one you're most likely to get as some lenders just won't offer interest-only deals. Those that do will want evidence of a credible repayment plan and might limit the amount you can borrow.
Decide if you're going for a fixed or variable rate mortgage?
The most important thing to remember is with a fixed rate, you have the surety of knowing EXACTLY what your mortgage repayments will be for that time.
In years past, variable rates were often significantly cheaper but right now the pendulum has swung more towards fixed deals, which are near their cheapest ever. But always pick the right deal for you - our What type of mortgage should I get? guide has more information on how to choose.
Make sure you've got enough cash for any associated fees.
It's not just about the rate when picking a mortgage - a whole raft of fees could come as part of the package - stamp duty, solicitors' fees, valuation/survey costs, mortgage fees and more. Our How much will buying a home cost? guide will give you the full information on what you'll need to pay and when.
Put as much towards your deposit/equity as you can. especially if you're close to an LTV rate boundary.
This may seem contrary to the point above, but mortgage rates drop in steps, known as loan-to-value (LTV) bands. So if you've a 9.75% deposit/equity, it's worth trying to get that up to 10% as you'll get a pick of lower interest rates.
If you've done all this, you're ready to follow the steps below to find the best mortgage for you. Remember that even if you've got an agreement in principle with a lender, you don't have to stick with it - especially if it is no longer offering the best deal.
Step 2: Get a rough idea of what you can get
Whether you're going for a fixed or variable 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.
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 tiny range of deals, not the array of alternatives, meaning it's highly unlikely you'll stumble across the best one for you.
Only check what it's offering as a starting point. Then use our Mortgage Best Buys tool to check the whole market.
Comparing mortgages can be confusing. There are over 6,000 mortgage products, so you need to know how to search through our comparison site to find the best deals for you. Click on the button below for a full how-to for mastering MSE's Mortgage Best Buys.
Need to know how to find the best deals for you?
The steps below help you benchmark a rate - to get a good estimate of what your rate and payments would look like. This is pretty straightforward and shouldn't take you more than 10 minutes.
Go to our Best Buys to get a benchmark
No comparison site 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 our Mortgage Best Buys tool has all deals available direct, and most available to brokers, so it's a great place to start.
Enter your loan amount and property valuation accurately
At the top of the screen when you click onto best buys, you have the opportunity to select if you're a first-time buyer, remortgaging or moving home. You'll also need to put in how much you want to borrow, and how much the property is worth.
This calculates your loan-to-value ratio (LTV) and so influences which products you're shown.
Find the info you need on screen
There's a lot of information. Some details are more vital to read than others. The most important information's prominently displayed; choices about your deal are on the left, information about the mortgage products is in the table. Use the site to locate:
- Buyer type (first-time buyer/remortgage/moving home)
- Mortgage type (eg, fixed/variable)
- Initial deal length (eg, three years)
- Interest rate (eg, 2.99%)
- Fees (arrangement, booking and valuation - no others)
- Monthly payment
It's now time to select what type of mortgage you want.
Use the filters on the left to choose between fixed mortgages and variable mortgages
If you're already certain, then select the type you want. If you're still not sure, leave all options selected.
Use the filters on the left to select your initial deal length
The inital deal length is how long your deal will stay at the advertised interest rate. For a fixed mortgage, this is how long the rate is fixed for. For a variable mortgage, this'll be how long a discount applies to the rate. If you know how long a deal you want, pick that from the filter. If not, again, leave them all selected.
Find a realistic benchmark
We say realistic, because if you're looking at the product at the top of the table, it's probably not. You're probably looking at a lovely low rate with a fairly large fee.
One way around this is to change the sort filter on the right hand side of the tool. You're able to search products by monthly payment, initial rate, set up fees - and our MSE Total Cost Assessment. This combines the rate and the fees to tell you which will be the cheapest mortgage overall; invariably it's not one with a large fee.
Choose your deal
Once you've found some deals that suit your circumstances and budget, click 'key information' to find out more. This will tell you other information about the product, such as how much you'll need to pay the lender for a valuation, whether you're allowed to overpay, and other information about the product.
Go get your deal
Once you're happy you can click on 'Next Steps'. This will then give you two main options. The first is to contact a broker about the deal. The broker will be able to check that it actually is the best deal for you by doing a comparison with other deals out there.
If you're confident you've picked a winner, you can go for the second option whick is simply clicking through to the lender to start an application.
Step 3: Talk to a mortgage broker
Once you've benchmarked a good rate from using our Mortgage Best Buys. see if a broker can beat it.
They 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.
Brokers will also be able to advise you on Help to Buy mortgages and other Government mortgage schemes (NewBuy, shared ownership and more) if you're eligible - tell your broker upfront if that's what you're looking for.
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 who 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. But you are NOT tied to using these, even if you buy via that estate agent.
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.
But not all brokers are the same. Some are limited in what they can offer you, so there are three crucial questions to ask.
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:
"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.
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:
Almost all lenders pay brokers what’s called a ‘procuration fee’ of roughly 0.35% of the transaction (Ј350 per Ј100,000). 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 on the Key Facts illustration, which they must provide before you apply.
Brokers may also charge you a fee directly. This might be on top of the commission, or instead of it (ie, 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 that charges you big fees before completion. If the purchase falls through, you'll probably still have to pay.
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 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.
Is it worth paying a fee?
As this is a MoneySaving site, we've always said our preference is not to pay a fee if you don't have to. For this, you're looking for a fees-free broker who can advise on the widest range of mortgages possible.
This sort of broker will make its cash from commission but can search out a good deal from a wide range of lenders, then checking the non-broker deals on top yourself.
However, there are two instances when a fee may be good value for money.
If you want face-to-face advice. Search your local area for a good broker. Just make sure they're whole of market, and that any fee charged is affordable and value for money. It's not the worst thing to spend money on, especially if it means you have someone you trust to get you a decent mortgage.
If you want one that finds 'non-broker' deals. When a broker recommends a mortgage they can't transact for you, they don't make commission. The brokers we've found which include ALL mortgages charge fees to compensate for the chance they won't get paid once they've found a deal.
If you value a face-to-face service, or you know a red-hot broker who charges a fee, then it's likely to only be a few hundred pounds. A small price to pay for a service you know you
Best Buys: Finding the top UK mortgage brokers
Now you know what you're looking for, as we can't review every mortgage broker in the UK, we've concentrated on some of the big ones that have nationwide scope, plus ways to find smaller brokers. Similarly, if you have any doubts about a broker, find a different one - there's nothing wrong with talking to several before you settle on one.
London & Country Mortgages*
Fees-free, searches all but direct deals
Specialist phone broker London & Country* never charges a fee, and will check the the vast majority of deals available to brokers, but won't check direct only deals, so you'll need to check the remaining ones yourself .
- How do I speak to it? Phone only.
- What lenders will it check? All standard deals available through brokers, but misses some biggies.
- Cost: FREE.
Full MSE review of London & County
L&C has been a top pick on MSE for many years, and we've received consistently strong feedback from people who have used it. If you've used L&C, please let us know about your experiences.
The advantage of only dealing with lenders that make deals available through brokers is that L&C will be able to help you through the whole process, in terms of filling in forms, information and support. The broker you talk to may also tell you about mortgages from lenders they don't deal with, but they don't have to.
Which? Mortgage Advisers*
Pay Ј500 and it'll search EVERY UK lender
Consumer organisation Which? has set up the Which? Mortgage Advisers* service, which offers a phone-based broker service for Ј499. It guarantees to check all lenders' deals, even if they're not normally available through brokers - so this includes perennially cheaper providers such as First Direct, HSBC and Tesco.
- How do I speak to it? Phone only.
- What lenders will it check? Every UK lender.
- Cost: Ј499 (Ј249 paid on application if you apply through Which? Mortgage Advisers, then Ј250 on completion).
Full MSE review of Which? Mortgage Advisers
However, Which? won't be able to transact direct-only deals for you - so if it tells you about a deal where it can't handle the paperwork, and you decide to go ahead, you'll be on your own. But it will mean that you don't pay.
Also, we have hardly any feedback on this service so far. Even though Which? itself is a big name, there's no guarantee of how this will all work. So if you use it, please tell us your experiences.
The first Ј249 is paid if Which? Mortgage Advisers finds a deal it can transact for you, and helps you apply for a mortgage. So beware that if something went wrong and you didn't complete the application, then that cash is lost.
You then need to pay another Ј250 on completion (Ј150 for Which? members).
Find a good local mortgage broker
If you prefer face-to-face advice. try to find a local broker that offers it fees-free; there should be quite a few. Websites like Unbiased.co.uk* or VouchedFor* both list brokers. You could ask a friend or even use the phone book - but it's crucial you know what you're getting.
- How do I speak to it? Face-to-face, usually!
- What lenders will it check? It depends on the one you find.
- Cost: Varies massively, always check.
Full MSE guide to picking a local broker
Give them a call, and ask the three questions in the picking a broker section to ensure they fit your bill. Make sure each broker you look at can advise from the entire mortgage market, and is fees-free (if that's what you're looking for).
For those wanting a more informal route, this website's forum includes a large Mortgage Board where some helpful mortgage brokers voluntarily answer questions - it's an easy, non-committal starting option.
Many are fees-free, whole-of-market mortgage brokers, so if they do help you, there's no reason not to ask them to sort your mortgage for you (always ask them the three questions first, though).
As always, the golden rule is to seek more than one opinion before deciding.
I've had credit problems in the past - do I need to go to a specialist broker?
If you've had credit problems, whether mild or severe (see the Credit Scores guide), and are trying to sort a mortgage, be very wary of going to the 'specialist poor credit' brokers who advertise everywhere.
These often charge very high fees as customers tend to think that's all they can get. There's absolutely no need to go to a specialist though; most normal brokers (including the ones listed above) also deal with what's called the 'sub-prime' market too, and at the same fee rates that they normally charge.
Am I allowed to speak to more than one broker?
Most brokers only charge upon completion of the mortgage so there’s nothing to stop you getting a second, or even a third, opinion. Two heads are often better than one, so why not try a few brokers and see if any beat the others?
Do check that the brokers don’t submit an Agreement in Principle without your permission as this involves a credit search on your file. Too many of these may actually hurt your credit score, meaning you get a worse deal (see the Credit Scores guide).
The other benefit of this is that different brokers often have exclusive deals from lenders (though there may be a small fee for 'booking' these). The big national brokers have their own deals and local brokers may offer exclusives via 'broker networks' which negotiate deals for them. Always weigh up the benefit of the exclusive deal against any fees.
I've heard some brokers do cashback - how do I get this?
It's worth asking what commission your broker's getting for arranging the mortgage. This should be stated on the last page of the mortgage illustration too - it's likely to be between 0.35% and 0.5% of the mortgage value. So on a Ј100,000 mortgage, the commission or 'proc' fee they get will be between Ј350 and Ј500.
It's worth asking if they're prepared to rebate any of their commission as cashback to you when the mortgage completes, especially if you're paying a fee for their services as well.
You're more likely to be able to strike a deal on larger mortgages (where your fee plus their commission is more than Ј1,000), but the broker's well within their rights to say no, whatever the final income they get from arranging your mortgage.
Find the best buy mortgages
If you're ready to get a mortgage, tell our Mortgage Best Buys tool what you want, and it'll speedily find the top deals for you.
Property investing newbie or an old hand wanting the top deal? Our free guide outlines all you need to know about buy-to-let.
Step 4: (Double) check lenders that brokers miss
If you used our Mortgage Best Buys to benchmark a rate before you went to a broker, and it couldn't beat your rate, then you've probably already done this.
And if your broker says it tells you about all deals on the market (not just the ones they can transact for you), this part should already have been done. It may be worth double-checking, but it's likely you've already found the best deal for you.
If you used a standard broker, it may still miss some deals as sadly, some lenders have retreated from the broker market to cut costs. Some simply don't allow brokers to access any of their deals; others reserve some deals for direct sales only.
For belt and braces, compare a broker's best result to the three types of mortgages it may not have included (if you haven't already done it using our Mortgage Best Buys ):
Lenders that don't operate through brokers
Tesco Bank and First Direct don't offer their deals through brokers. Plus, HSBC only offer their deals through two broker networks (Countrywide and London & Country), so if you're not with them, you'll need to check HSBC's deals yourself.And Yorkshire Building Society and Britannia don't pay brokers a fee. Brokers who say they search the whole market should include them in a comparison but, they don't have to offer to transact for you.
Lenders that don't offer all their deals through brokers
You'll really need to do some legwork for these. A few lenders, including Nationwide and Halifax, now put some deals through brokers and offer some only direct. Just to show there's nothing like keeping things simple!
A recent trend is that the direct deals can be much more competitive (but not always). Usefully, MSE's Mortgage Best Buys tool finds the best deals for you, and tells you if they're available through brokers or only direct.
Exclusive deals from other brokers
In the final category are the deals which are available exclusively through certain broker networks, as they sometimes negotiate their own deals with lenders. Unfortunately, we can't cover all of these in our Best Buys tool, but they're not a significant proportion of the market. For full belt and braces, you could try a few different brokers.
To properly compare deals, find the best deal that a broker can offer you, and the best deal you can find using our Mortgage Best Buys. then use our Compare Two Mortgages or Compare Fixed-Rate Mortgages calculators to see what each will cost you.
Don't use the APR to compare - mortgage APR confusion
The best comparison is to use the rate you'll pay for the incentive period in the comparison - and compare over the length of time you think you'll have the mortgage. DON'T compare one mortgage's APR with another.
All lenders have to tell you their APR - 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 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 APR 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 discount/fixed rate, the fees and the rate it goes to once your deal has ended.
Step 5: Check your 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.
Key Facts illustration checklist
Questions to ask:
- 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.
Why do you need to check and keep the illustration?
If 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. Scan it, file it, keep it!
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. If your name is not spelt correctly or the loan figure is wrong, 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.
You also need to be sure there's nothing unexpected in it, particularly if it 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.
Scan it, file it, keep it!
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