Mortgages

Are you looking for the best option on a Mortgage

Getting a mortgage in London

First step, of course, is to set a price range for a property - it's no good trying to take out a mortgage on a Kensington home if your income can barely stretch to a bedsit in Brixton.

For the most part, prospective buyers will already have some equity, whether this is in the form of savings or other investments, or else the amount they will get from the sale of any current property. Once this is used to cover the deposit needed to secure a purchase - the size of which will vary according to a number of factors, not least the cost of the home, length of mortgage and economic climate - it will then be necessary to undertake what for many is the most complicated part of buying a home, namely obtaining a mortgage.

Fortunately, the amount it is possible to borrow is usually taken out of a buyer's hands, with banks and building societies often having strict lending criteria, usually based around multiples of incomes. As such, buyers are simply left with choosing what product suits their circumstances.

In addition to the mortgage advisors on hand at most high street banks and building societies, tips on getting the best deal can be sought out online through a number of comparison sites and portals. However, for those looking to consult a real person rather than a machine when making what is likely to be the biggest financial decision of their lives - though keen to avoid any 'hard sell' that may come with in-house advisors - a number of independent mortgage advisors operate across London, with their details either available online or often through estate agents.

What type of mortgage to opt for?

While there are numerous options available to home buyers, mortgages can be divided into a few key types, each of which can appeal to borrowers according to their needs and market conditions.

In particular, mortgages tend to be divided between variable (or tracker) rate deals and fixed-rate products.

As the name suggests, fixed-rate deals mean that the interest rate on a mortgage is fixed for a set period - say two or five years - regardless of market fluctuations. While such products do make it easier for buyers to draw up budgeting plans well in advance and can be profitable should interest rates rise over the period of the deal, borrowers won't benefit from any falls in the base rate of interest. In addition, coming out of a low-rate deal to find that rates have gone up can lead to a major financial shock, though the reverse is also the case.

Meanwhile, variable rate mortgages mean that borrowers' payments are tied to mortgage or interest rate changes, though such fluctuations are usually calculated on an annual basis. Just as with fixed-rate deals, variable rate mortgages can have their advantages, as well as their disadvantages, with borrowers either hit by rising rates or enjoying falls in their monthly commitments.

As well as these two main categories, several other mortgage types are also available to London property buyers, though they are less common. Interest only mortgages allow buyers to just pay off the interest on their loans for a fixed period, while capped deals allow borrowers to enjoy fixed-rates while also benefiting should rates fall - though while they are a good way of budgeting, they can come with higher fees.

Additional costs

On top of working out how much to borrow and in what form, London home buyers also need to take into account various additional charges likely to hit them when making a move.

Alongside getting a property independently valued and surveyed, buyers will also have to fork out for legal and conveyancing fees, as well as stamp duty and land registry fees, with all these extra commitments often totalling several thousand pounds.

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