How to get the best Mortgage deal

With so many different mortgage rates available it can be a daunting task to find the lender and scheme that is the most suitable to meet your individual requirements. We have narrowed the market down to bring you the best mortgage rates for each category. We have used years of experience so that you do not have to trawl through endless lists, websites or even up and down the high streets, in the hope of finally arriving at the best product to meet your needs.

What is a mortgage?

A mortgage is a long-term loan, usually secured on your home. 'Secured' means that, if you don't keep up the loan repayments, the lender can repossess your home and sell it to get its money back.

Remember: If you can't keep up your mortgage payments, you could lose your home. Don't overstretch your budget!

What sorts of mortgages are available?

Mortgages differ in the methods of repayment, the interest you pay and other features such as flexibility and cash incentives.

There are two basic ways to repay your mortgage - a repayment mortgage or an interest-only mortgage - and several different types of interest rates: fixed, discounted, capped, tracker or variable. The table below sets out the main types of interest rates and how they work.

Should I use the services of a letting agent?

As a general rule of thumb, if you are not in the vicinity of the property or have no experience of letting a property out, then it is probably better for you to use the services of a letting agent. Unfortunately there are no standard qualifications required to become a letting agent. Anyone can call himself or herself a letting or management agent and not have to worry about being licensed or undertaking any formal training. If you are going to use the services of an agent it is advisable to choose one that belongs to one of the main Associations such as ARLA, ISVA, NAEA or RICS. Membership of these associations involves the agent complying with various rules and procedures set down by the Association.

What does a letting agent do?

A letting agent is responsible for looking after your property. A letting agent also knows the area and probably can get your property occupied quicker than what you can. They will vet prospective tenants for you and collect the rental income. They will also take care of inventory's logging all your possessions and the state of repair. This will again be checked when the tenancy is over. The letting agent is also impartial between you and the tenant and will make sure that any complaints the tenant has are passed on to you or dealt with if minor, to minimize the chances of breach of contract.

What does a letting agent charge?

A letting agent on average charges between 8% and 15% of the rental income received. (Letting agents fees can be offset against your taxable profits.)

What type of property should I purchase?

Definitely select a property that can be sold on again quickly. If being a landlord/lady is not for you, then you will at least want the experience to be as painless in the pocket as possible. Do your homework and check the area out (is it close to amenities etc.) and also look at the rental demand. Would your mother, wife or sister feel safe returning to the property after dark? Remember if you would or wouldn't live in the property will other people?

Where should I purchase a property?

Don't fall into the trap of thinking that the property needs to be local to you. There are letting agents all over the UK. This venture is an investment and therefore you should invest your cash in the best area possible to give you the best returns.

What is the ideal term of years for buy-to-let investments?

Buying a property to let out should not be viewed as a short-term investment. The longer you can retain the property, the more the chances are of you making a tidy profit

Is there a limit to the number of properties that I can own?

No! You can have as many properties as you can afford. Some lenders will restrict you to having a certain number of mortgages with them, however, there are plenty more lenders to choose from.

I do not earn much money and I have a fairly large mortgage on my main residence, can I still get a mortgage on a property to let out?

Yes! Buy-to-let lenders are more concerned with the property than you. This is because it is the rental income that is going to fund the mortgage rather than your income. Let's face it you are putting down a sizable deposit, so it is you not the lender that is taking the risk.

What sort of tenancy agreement should I use?

An Assured Short hold Tenancy agreement (AST) for a period of 6 or 12-months is the best tenancy agreement to have as far as lenders are concerned and is the most popular type of agreement in use. These agreements can be purchased from anywhere; however, they are very general and may not fit exactly what you are looking for. It is worth spending a little extra to get your solicitor to draw up an agreement that meets your individual requirements.

My spouse is a non-taxpayer. Can I act as guarantor so the property can go in my spouses name to save tax?

Yes! As well as being possible, if you are a high rate taxpayer it is probably advisable.

I am a higher rate taxpayer and I have a limited company, can I use it to acquire a mortgage, to purchase property and pay tax at the small business rate?

Yes and No! You can purchase property through a limited company, providing that is the sole reason the company was set up for. The reason for this is that if the original company went bust, then the liquidators could claim the property and the lender may not get it's money back.

Other features

Some providers offer flexible features such as allowing overpayments and underpayments on certain conditions. Some offer cash back - a substantial cash sum (for example 3-5% of the amount borrowed) when you take up the loan. They may charge a higher interest rate in return for this cash sum.

Things to think about before choosing a mortgage.

How much you can afford. You should consider how much you can afford now and what you may be able to afford in the future. Typically, the maximum mortgage a lender offers is from three to three-and-a-half times the main earner's income, plus one times any second earner's income; or two-and-a-half times your joint income. Some lenders offer more, some less. Others base the amount they lend on an 'affordability' test. Don't borrow the maximum possible if it costs more than you feel you can afford each month.

Length of the mortgage term. Many mortgages are set up over 25years but they can be for shorter or longer terms. Beware of making financial commitments that continue past the age that you intend to retire. When choosing a mortgage, think about the total amount you will pay over the years, as well as what you pay each month. With a shorter term, you will have higher overall monthly repayments but you will pay less in total as you won't pay so much interest.

The interest rate deal. Think carefully about any special deals as there can be strings attached. Check these points:

• If you can make lower payments for the first few months or years, you will then have to make higher payments later on?
• Often there is an early repayment charge if you pay off all, or part, of the mortgage during the period of a special deal. Does the early repayment charge also apply beyond the end of a special deal?
• Can you take the mortgage with you if you move?
• For a mortgage with cashback will you have to pay back some or all of this money if you repay all or part of your mortgage within the first few years?

Before you sign up.

• Check all the details about the mortgage with the provider or your mortgage adviser.
• When deciding on the best mortgage doesn’t just look at the initial interest rate.
• Many mortgages offer incentives or other features that can affect the overall cost of the mortgage. Weigh up the features and incentives offered with the amount you have to pay each month.
• Consider how possible increases in interest rates may affect your monthly repayment.
• Think of the overall package and whether it's right for you.