Mortgage Dos and Don’ts

Do consider changing mortgages if you are on your lender’s standard variable rate (SVR) or are coming to the end of special deal.

Do overpay your mortgage if you can as this can shave thousands of pounds of interest and shave several years off the term. Just a small amount each month could make a big difference.

Do review your mortgage regularly to make sure you are getting the best deal and keep an eye on interest rates.

Don’t take out a mortgage from your bank, just because you have banked with them for years. Make sure you check out the market before making your decision.

Don’t take out a mortgage that charges an arrangement fee as a percentage. A 1 per cent arrangement fee would cost £2,000 on a £200,000 mortgage.

Don’t take out mortgages that have extended tie-ins otherwise you may get stuck with a costly mortgage. There are plenty of good deals around that don’t tie you in to the lenders’ standard variable rate (SVR) once the special-deal period has ended.

Don’t take out a mortgage that imposes a higher lending charge (HLC). These are sometimes charged on mortgages above 90 per cent loan to value (LTV). There are dozens of lender who don’t charge these.

Don’t add fees to the mortgage if you can afford to pay them up front. If they are added to the mortgage you will end up paying interest on them for the term of the mortgage.

Don’t take out products where you have to buy the lenders’ insurance. The headline rate can sometimes be dependent on you taking out the lender’s house contents and building insurance. Don’t do this unless you are sure you’re getting a good deal.

Don’t keep on extending the term of your mortgage when you remortgage or move house, unless it’s the only way to keep mortgage payments down.

Don’t consider an offset mortgage unless you have a large amount of savings. Interest rates on these mortgages are higher than on standard mortgages and they aren’t worthwhile unless you have at least £10,000 in savings to offset.

Don’t assume you’ll get the best deal from a mortgage broker. Not all of them have access to the entire market and may choose from a small panel of lenders. Find out how many mortgage lenders a broker has on its panel and how the broker gets paid – ie by fee or rebated commission. A 1 per cent fee doesn’t sound like much, but on a £150,000 mortgage it works out at £1,500.

Don’t forget housebuying costs when working out your sums. On top of your deposit, you need to find money to pay for mortgage fees, searches, legal fees and stamp duty, as well as removal fees.