How to find a good deal on your mortgage

Where to get a mortgage

You can get a mortgage directly from a bank or through a mortgage broker. Both have their advantages and disadvantages.

Home loans are also available from ‘non-bank lenders’ such as building societies, finance and insurance companies, trustee companies and credit unions.

‘Non-conforming lenders’ are an option for people who can’t get a bank loan, because of a bad credit history or lack of proof of income. These lenders usually only accept applications through mortgage brokers.

Banks

Advantages

Banks offer a wide range of mortgage options.
Competition between banks can sometimes lead to great deals, such as a bank contributing to legal bills, discounting insurance or lending at a low fixed-interest rate.
Banks can offer discounts on day-to-day banking costs or even waive transaction fees altogether if you have a mortgage with them.
Their loan application fees are usually negotiable.
If there’s a dispute, you can go to the Banking Ombudsman.

Disadvantages

Banks tend to be more cautious and are more likely to turn you down if you don't have a good credit history.

Here are some questions for lenders to have on hand when meeting with a bank.

Mortgage brokers

Brokers deal with a number of lenders, so they can save you time shopping around.

Advantages

Mortgage brokers know the interest rates and application criteria for different lenders, and can negotiate on your behalf.
Brokers can help you put a loan application together.
They may be able to help you find a loan if a bank says no, and may be able to get a better deal than if you went direct.
Mortgage brokers are required to be licensed financial advisers. They must have a complaints process in place and belong to a dispute resolution scheme. Check the official Financial Services Providers Register at the Companies Office website.

Disadvantages

Brokers don't cover all lenders. Some banks don't deal with mortgage brokers.
You have to shop around for a mortgage broker first, settle on one, and then let them shop around for you.
If you don't end up borrowing through a loan they find, you may still have to pay a cost. Make sure to read the fine print.
Different lenders pay different commission rates to mortgage brokers. This means that they may prefer to place you with one lender instead of another because it benefits them more. It may not be the best deal for you.

Questions to ask a lender when getting a mortgage

What fees do you charge?

For all loans, ask about application fees and other charges such as a low equity fee.

For fixed-interest loans, ask what fees apply if you increase repayments, make lump sum repayments, or repay the whole loan early.

What will be the total cost of this loan?

(Including fees and interest, for the sum I am borrowing and the term I have chosen.)

The lender will have to make an assumption about interest rates to do this calculation. But it will show how much you’ll pay back in total. (Note that the lender is required to disclose the fees and interest separately.)

Also, ask for the total regular payment in a year if the interest rate were to be 1% higher than now. That will give you some idea of the risk if rates rise.

What changes can I make after the mortgage is set up?

For all loans, ask whether it's possible to increase regular payments from time to time, pay in lump sums, and pay off the mortgage in full before the end of its term.

Ask if there is a required period of notice before reducing or paying off the loan with a one-off payment.

Fixed-interest loans normally convert to a floating rate at the end of the term - ask about taking another fixed term instead at no charge.

If I buy a new house, can I transfer the existing mortgage?

If the answer is yes, it's likely to save money in fees.

Where can I go for help?

(If I have a problem that I can’t sort out with you.)

Approach the lender with a complaint or problem in the first instance. If that doesn't result in a satisfactory resolution there are independent bodies available which can investigate and help settle disputes such as the Banking Ombudsman and the Financial Services Federation, which represents some non-bank lenders.