How to Find the Perfect Mortgage and Where to Start

Owning your own home is something that many of us aspire to do in our adult lives. As a country, we have been known to obsess over deposits and finding that perfect mortgage. But where do you start? Do you even know what you can afford to borrow? What interest rates or the difference between an interest-only, flexible rate or a fixed-rate mortgage are available? There is a lot to consider before you sign on the dotted line.

cobbled street with streets
Source: Photo by Lina Kivaka from Pexels

Here’s how to find the best mortgage for you.

The UK mortgage market has changed considerably during the last decade, primarily due to the global financial crisis in 2008. If you remember the Northern Rock scandal, many were trapped in. This led to a review of how mortgages were managed and approved and created new borrower rules, but according to The Guardian, UK mortgage applications are at a 12-year high with house prices still rising. So we all still want to buy our dream homes, which is no surprise when, according to ONS in the UK, 63% of households are homeowners.

However, it is worth mentioning that homeownership has declined within the mid-30s to mid-40s age band, with most still renting in the private sector compared to their parents, who own their own homes. The ONS report that if the declining homeownership trend continues for the current generation of 35 to 44-year-olds, older people in future would be more likely to live in private rented accommodation than today.

But the government has a plan, as the BBC mentioned Boris’ new first-time buyer scheme offering 95% mortgages. It could be the perfect mortgage for first-time buyers, although I wouldn’t get too excited. The government introduces a new housing scheme every five-ten years, which I will discuss below.

Understand Your Needs.

Before shopping for a new home loan, ensure you understand what type of loan will work best for you. You should also consider how much money you’ll need to borrow, whether you plan to use the house as an investment property, and how much equity you have in your current home.

Should you rent or buy my home? Do you want to be paying someone else’s mortgage? While these are valid questions to ask yourself taking on your perfect mortgage, there is a huge commitment whether you manage to do this alone or with a partner.

Gray Fabric Sofa Placed Indoor in apartment
Photo by Vecislavas Popa

There are benefits to both; the upside of buying is that when you’ve made your last mortgage payment (and I mean your last), the house is officially yours! That is fantastic; what an achievement, but there are some downsides. All the maintenance, issues and problems become your responsibility, not your landlords, and it can also be an expensive mistake if you realise you have awful neighbours!

Owning a property is a considerable investment and one that you shouldn’t jump into without weighing up the risks. It could mean giving up all those extra luxuries you are used to.

Know Your Budget.

Before jumping in and applying for every mortgage out there, it is worth noting that you have three! Yes! That’s three mortgage applications before it harms your credit rating. Credit profiles see it as three rejections, not just looking at offers, so be careful before applying. There are, however, options to help you out, including mortgage calculators that can help you work out the deposit you need and the amount you are likely to borrow based on your income so you can secure the perfect mortgage for you.

Toy house surrounded with money the perfect place to start
Source: Photo by bongkarn thanyakij from Pexels

Shop Around For A Loan That Fits You.

Once you have an idea of what you can afford, its time to shop around; always try your high street bank (if you have one) or building society if you have any accounts with them; they can often offer the best deals. If you have particular circumstances, for example, you are self-employed, on a contract, or you need a specific mortgage, then your best bet is to try an all-of-the-market mortgage broker; they can look across a whole range you would need at three years proof of income and supporting documents that you can afford the repayments.

The next step is to ask for a mortgage in principle. This is the first stage when you approach the lender for the mortgage and ask for the best rates etc. You need to be prepared to have a clean credit history, and you don’t want any excuse for them turning you down. If you can’t borrow as much as you thought, there are other options to help you get on the property ladder.

A Family Walking in the House for a house viewing
Photo by Alena Darmel

Government Schemes

In the early 2000s, the labour government realised that young people struggled to get on the property ladder. So they looked to help first times buyers secure their own properties with financial support or low-cost housing initiatives. Included below is an example.

  • Help to Buy
  • Right to Buy/Right to Acquire
  • Shared ownership
  • People with disabilities
  • Shared equity schemes
  • Starter Home scheme

Some of these schemes are ended in April 2022; others will no longer support homebuyers who own a property. Depending on your area, it will depend on the support you could be offered. You can even approach your local council, which may have other options, including rent to buy and low-cost rent (so you can afford to save for a property).

As of November 2022, the government only offers three schemes

  • A loan to help with the cost of a new-build home if you’re a first-time buyer (in England and Wales)
  • a home through shared ownership (UK-wide)
  • a loan to help with the cost of building a home or hiring someone to build one (in England, Scotland and Wales)

The Impact of Covid-19

No one can deny that the coronavirus has enormously impacted the housing market. With sales put on hold and even completion dates pushed back months due to the virus.

We can’t forget that we had to enjoy our homes for what they offered for the year’s first half. However, the coronavirus bought furloughed staff, redundancies, contract changes and some closure of their businesses.

Happy couple dancing while packing boxes
Source: Photo by Ketut Subiyanto from Pexels

In the UK, the Nationwide house price index for May showed that prices fell 1.7% from the previous month, the largest decline for 11 years. However, Rightmove reported increased property searches for out-of-city areas like London. At the same time, many expected a sharp fall, like in 2008; however, the prices have stayed for the time being.

However, after the virus, the first thing to change was the approval of mortgages, with most lenders asking for larger deposits, wanting larger incomes from first-time buyers, and generally taking the best deals off the market. So it has become harder for many buyers to secure that perfect mortgage offer.

If you already own your own home, some homeowners can release money that is already available but is locked into the house; these schemes are called shared equity agreements; you don’t have to pay anything back until either the property is sold or the agreement comes to an end and can be the perfect solution if you can’t afford to move and decided to improve.

Real Estate Agent Discussing in Front of His Client how to find them the perfect mortgage
Photo by RODNAE Productions

Perhaps you’ve got some extra funds available and decide to purchase that dream home aboard. Financing a property overseas can be complex, especially when obtaining an international mortgage. There are, however, specialist overseas property and finance specialists like who can make your life easier and guide you through the progress.

Word of Warning

Owning your own home is rewarding. From that first lick of paint to a complete house renovation. However, before finding your dream home on Rightmove or Zoopla, ensure you are financially ready for the commitment. Don’t lease a car or take out a loan, as this could substantially lower your mortgage offer or cause it to be turned down. If you have credit cards or loans, get them paid off first and make sure you check your credit report for any nasty surprises.

The process of finding a home loan can seem overwhelming at times. This guide will hopefully walk you through the steps needed to secure the best possible rate on your perfect mortgage.

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  1. Hi Gemma. It can be a scary prospect taking on a mortgage, can’t it?

    We’ve paid ours off now but there are two things that really stick in my memory:
    1. How ridiculously easy it seemed to get a 100% mortgage (yes, it was that long ago!)
    2. The truly terrifying scenario of having a variable rate mortgage and our starting rate ending up being doubled thanks to government policy in the early 1990s!!!
    So, for anybody setting our on their mortgage journey now – don’t dismiss the peace of mind offered by fixed rates 🙂

    1. alittlebitsocial2 says:

      Thank you Richie, we were lucky our fixed rate was 6% when we took out our mortgage. They wanted us to remortgage but the variable rate was 3% so we stuck with it. This was the early 2000’s so very different now.

  2. These are great tips. I love that you included the fact that there ARE cons to buying a property as well. I find that our society pushes the idea of homeownership and while there are benefits, it’s not always the right choice. I went through a period of time where I was moving regularly – largely due to changes of job, etc. I’m talking 12 different houses in 10 years. That would have been WAY too complicated to try buying each time knowing that it was likely going to be a short-term stay. I swore that I wouldn’t consider ownership until I knew I wanted to stay in one place.

    1. alittlebitsocial2 says:

      Thank you Britt, I completely agree. There isn’t much flexibly with homeownership. We had to go the route of a shared equity scheme and it meant we couldn’t move for nearly 10 years! We got trapped due to the financial crisis. They wouldn’t let us rent it out either due to the shared part and we needed to move for work commitments. We sold in the end and now rent. Hopefully we will get back on the property ladder eventually.

  3. Great post ☺️ I’ve just moved back to Australia from the UK and one of my top goals (once I have work!) is to buy a house. I’m lucky enough to have inheritance which is doing next to nothing in savings accounts so I figure I may as well put it to work in the housing market! Thanks for sharing!

    1. alittlebitsocial2 says:

      Thank you Helen, we bought our first house with inheritance and did some renovations. It is worth it. Best of luck 🙂

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