A mortgage is a long-term commitment secured against property. Small differences in rate, fees and repayment structure can have a significant effect over time, so offers should be compared using consistent assumptions.
Availability and consumer protections vary by country. Borrowers should use regulated lenders and obtain advice where local rules require it.
Information needed for a comparison
Use the same property value, deposit, loan amount, term and repayment basis for every illustration. Confirm whether fees are paid upfront or added to the balance.
- Purchase price and lender valuation.
- Deposit and loan-to-value ratio.
- Household income and committed expenses.
- Preferred fixed or variable period.
- Expected time in the property.
Interest rate types
| Rate type | Feature | Risk to consider |
|---|---|---|
| Fixed | Rate remains unchanged for an agreed period | Early repayment charges may apply |
| Variable | Lender can change the rate under the contract | Payments can rise |
| Tracker | Rate follows a specified benchmark plus a margin | Benchmark changes affect payments |
| Discounted | Temporary discount from another lender rate | Future pricing may be less predictable |
Loan-to-value and deposit
Loan-to-value, or LTV, divides the mortgage amount by the lender’s accepted property value. A larger deposit can improve access to lower LTV products, but the borrower should retain funds for transaction costs and emergencies.
The lender may use a valuation below the agreed price. If this happens, the buyer may need a larger deposit or a different mortgage.
Compare the full cost
Include arrangement, valuation, legal, broker and transfer fees. A product with a higher rate and low fees may cost less for a small loan or short holding period than a low-rate product with a large fee.
Check the annual percentage measure required in the relevant country, but also calculate the cost over the period you realistically expect to keep the product.
Affordability and stress testing
Lenders assess income, expenditure, dependants, existing credit and possible payment increases. Borrowers should complete their own budget and allow for insurance, maintenance, taxes and service charges.
Personal stress test: calculate the payment at a higher interest rate and confirm that the household could still meet essential expenses.
Early repayment conditions
Fixed and discounted mortgages may charge for overpayments, refinancing or full repayment during an initial period. Check the permitted annual overpayment and how the charge is calculated.
Flexible features are valuable only if they match the borrower’s likely behaviour.
Refinancing a mortgage
Refinancing may reduce a rate, change the term, release equity or consolidate borrowing. Compare the new product with the cost of remaining on the current mortgage.
- Request the current redemption balance and any exit charge.
- Estimate the property value and resulting LTV.
- Add all new lender, legal and broker fees.
- Compare monthly payment and total cost.
- Check whether extending the term increases long-term interest.
Before accepting an offer
Read the binding offer and supporting documents. Confirm the expiry date, conditions, repayment basis, rate-change mechanism, fees, insurance requirements and consequences of missed payments.
This guide is general information and not a personal mortgage recommendation.