Beginner's Guide To: Mortgages

It's been very difficult to get a mortgage recently unless you've had a deposit of at least 25 per cent. But there are indications that the situation may be improving. Not only are the leading mortgage rates at historic lows, but some providers are also relaxing lending criteria. However, the mortgage market is extremely complex, so here are the basics.

Fixed or variable?

Fixed rate mortgages offer peace of mind as you know exactly what your repayments will be for a set period of time – the most popular terms are two and five years.

You can fix for longer though, although an early redemption charge (ERC) will usually apply.

Fixed rates are hugely popular at the moment. The Bank of England isn't expected to cut base rate any further, so many borrowers are fixing in the hope they are locking in at the bottom of the market.

Another option is a variable rate. The rates on these products are either linked to the lender's standard variable rate (known as discounts) or the base rate (known as trackers). If you go for a variable mortgage, your monthly payments can go up or down.

As with fixed rates, many variable mortgages have introductory periods and you will be charged an ERC if you want to get out of the deal during that time. For maximum flexibility, lifetime trackers are often penalty-free.

Loan to value (LTV)

This refers to the maximum you can borrow as a proportion of the property's value – what deposit the lender will require. If the LTV is 75 per cent, the maximum you can borrow is 75 per cent of the property's value, so you'll need a deposit of at least 25 per cent.

Fees

You must factor in the impact of fees when comparing mortgages – don't just go for the lowest headline rate. It may work out cheaper to opt for a product with a higher rate if the fees on that deal are lower. There will also be legal and valuation costs.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Mortgage Administration Team Leader

    Negotiable: Recruitment Genius: This company prides itself on its ability to p...

    Recruitment Genius: Mortgage Advisor

    Negotiable: Recruitment Genius: This company prides itself on its ability to p...

    Ashdown Group: Solvency II Project Manager - 10 month contract - £800 p/d

    £800 per day: Ashdown Group: A highly successful, global financial services co...

    SThree: Trainee Recruitment Consulant

    £20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

    Day In a Page

    A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

    A Very British Coup, part two

    New novel in pipeline as Jeremy Corbyn's rise inspires sequel
    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Icy dust layer holds organic compounds similar to those found in living organisms
    Chinese web dissenters using coded language to dodge censorship filters and vent frustration at government

    Are you a 50-center?

    Decoding the Chinese web dissenters
    The Beatles film Help, released 50 years ago, signalled the birth of the 'metrosexual' man

    Help signalled birth of 'metrosexual' man

    The Beatles' moptop haircuts and dandified fashion introduced a new style for the modern Englishman, says Martin King
    Hollywood's new diet: Has LA stolen New York's crown as the ultimate foodie trend-setter?

    Hollywood's new diet trends

    Has LA stolen New York's crown as the ultimate foodie trend-setter?
    6 best recipe files

    6 best recipe files

    Get organised like a Bake Off champion and put all your show-stopping recipes in one place
    Mullah Omar, creator of the Taliban, is dead... for the fourth time

    Mullah Omar, creator of the Taliban, is dead... again

    I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
    Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

    Margaret Atwood on climate change

    The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
    New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

    New Dr Seuss manuscript discovered

    What Pet Should I Get? goes on sale this week
    Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

    The cartoon hedgehog leading the way into a whole new reality

    Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
    Ants have unique ability to switch between individual and collective action, says study

    Secrets of ants' teamwork revealed

    The insects have an almost unique ability to switch between individual and collective action
    Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

    Donovan marks his 50th year in folk

    The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
    Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

    Simulator recreates thrill of F1 circuit

    Rory Buckeridge gets behind the wheel and explains how it works
    Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

    Twitter accused of 'Facebookisation'

    Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
    Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

    Jane Birkin asks Hermès to rename bag

    The star was shocked by a Peta investigation into the exotic skins trade